According to the Taiwan Purchasing Managers’ Index (PMI) released on April 1, 2026, by the National Development Council and the Chung-Hua Institution for Economic Research, demand in the AI and semiconductor sectors remains robust. However, pricing volatility in petrochemical and plastic products triggered by the Middle East conflict has led to a mixed manufacturing landscape: while new orders continue to expand, production has contracted. Furthermore, indices for supplier delivery times and raw material prices have surged at their fastest pace since the second half of 2022. Industry players report that supply chain challenges have shifted from mere “price fluctuations” to concerns over “supply stability.” The situation has accelerated a divergence among industries based on bargaining power and supply chain positioning, ultimately evolving into a broader reallocation of resources.
The current shockwave is transmitting along the “crude oil/naphtha – basic chemicals – midstream materials – end-user industries” pipeline. Yet, the pivotal shift lies upstream, where suppliers have transitioned from passively accepting orders to actively screening clients. With petrochemical producers withholding inventory and suspending quotations, suppliers are leveraging pricing and delivery schedules to allocate resources, prioritizing high-value clients. The core supply chain issue is no longer just “price volatility,” but rather “who qualifies to be supplied.”
How Supply Chain Restructuring Drives Divergent Industry Outcomes
The consumer plastics chain has borne the brunt of the impact. Surging prices for PE, PP, and PVC have been rapidly passed down to downstream manufacturers of plastic bags, water pipes, and building materials. Composed predominantly of small and medium-sized enterprises (SMEs), these businesses operate with low inventories and weak pricing power. The market has witnessed scenarios of nominal pricing with no actual market transactions, or accepted orders without guaranteed delivery. Should the conflict persist, the risk of production halts will escalate.
Midstream sectors, such as rubber and textiles, are temporarily shielded by existing inventories and long-term contracts, allowing them to sustain short-term production. Nonetheless, relentlessly rising costs will inevitably force these firms to either raise prices or squeeze profit margins. Given the vast disparity in the ability to pass costs onto end-users within the textile industry, sustained supply chain disruptions will cause financial pressures to surface gradually.
In contrast, high-end electronics supply chains—including PCB and semiconductor manufacturing—have maintained supply stability through long-term agreements, quota systems, and strategic partnerships, despite facing higher costs for epoxy resin, fiberglass cloth, and copper foil. These enterprises report that their primary challenge is rising costs, not material shortages. This underscores a hierarchy formed around value-add: low-value-added industries are the first to be squeezed out, midstream sectors adjust under pressure, and high-value-added industries remain relatively insulated.
The Overlooked Link: Upstream Gains and Downstream Strain in Metals and Pulp Industries
The current shock has also permeated basic raw material sectors, such as steel, pulp, and construction materials, driven by soaring energy and transportation costs. These energy- and logistics-intensive industries are highly sensitive to oil price fluctuations. However, constrained by low product differentiation, fierce price competition, and cyclical demand, they face a structural disadvantage. When costs rise, upstream producers can adjust quotes in tandem with global commodity prices, but downstream players often cannot fully absorb these hikes. This results in compressed margins, production cuts, and acute cash flow pressures. Compared to the electronics sector, which can pass on costs via technological leverage and long-term contracts, basic materials industries find themselves forced into passive absorption.
Take the PCB industry as an example: historically, information asymmetry among material suppliers, manufacturers, and brand clients often triggered material hoarding and pricing chaos. Today, the supply chain has steadily shifted toward collaborative operations through joint development, long-term material lock-in contracts, and cost-linking mechanisms. This integration of “technology, contracts, and information” not only enhances supply stability but has also become a core corporate competency in combating price volatility.
Fundamentally, this wave of shocks represents a restructuring of supply chain hierarchies. While short-term material shortages may ease and prices could retrace, geopolitical risk has become the new normal, prompting a shift from price-based mechanisms to resource-allocation models. For instance, in the memory sector, AI-driven demand has redirected production capacity toward high-end applications, squeezing the supply of traditional products and driving up prices—a reflection of proactive corporate adjustments amid cost and demand pressures. The key factor has shifted from simple cost control to a company’s ability to adapt to the current environment. Success will depend on restructuring supply chains, securing critical resources, and building resilient partnerships. These elements will determine a company’s position in the next era of industrial reorganization.
Source: Shin-Hui Chen, Jerry Pai (April 16, 2026). Supply Chain Costs Surge Amid Middle East Conflict, Accelerating Industrial Divergence. China Times https://www.chinatimes.com/newspapers/20260416000227-260210?chdtv