Robust global demand for AI hardware continues to fuel brisk manufacturing activity across Asia and Europe. The Manufacturing Purchasing Managers’ Index (PMI) published by the Chung-Hua Institution for Economic Research (CIER) climbed to 62.5 in August 2026, marking the 11th consecutive month of expansion and the fastest pace of growth in nearly five years. Manufacturing PMIs in Japan, South Korea, and China also remained above the 50-point threshold, while the Eurozone index surged to its highest level since May 2022. These figures indicate that AI-related demand remains a key driver sustaining the global manufacturing sector.
Hsien-Ming Lien, President of the CIER, said supply chain pressures are gradually emerging as demand rises rapidly. They include higher raw material prices, shortages of certain critical components, supply allocation, and longer lead times. Persistent supply bottlenecks could constrain growth in orders and production while further increasing business costs.
Taiwan’s August PMI showed that new orders and production remained at high levels. However, the manufacturing inventory index fell to 58.2, marking the third consecutive month of slower expansion and the weakest pace since March 2026. This indicates that supply chain constraints are limiting production capacity despite strong demand. The electronics and optical industry has been particularly affected by tighter supplies of critical materials and rising costs. Lead times for raw materials used in some advanced printed circuit boards, AI-enabled high-speed optical communications products, and power semiconductors have even exceeded 52 weeks.
Robust AI Hardware Demand Drives Asia-Europe Manufacturing Amid Fears of Shortages and Prolonged Lead Times
Lien indicated that raw material prices are rising at an accelerating pace, with some manufacturers reporting a scramble to secure supplies. Cost pressures are building throughout the supply chain. Even amid strong end-market demand, shortages of critical components could create production bottlenecks. Key components for AI servers, including central processing units (CPUs), graphics processing units (GPUs), and high-bandwidth memory (HBM), must be integrated via advanced packaging. Tight HBM capacity could persist into 2027 and 2028. If critical components remain unavailable, manufacturers could face a situation in which they have orders but cannot ship finished products.
Shin-Hui Chen, an associate research fellow at the CIER’s Taiwan Economy Research Division, said the continued strength of the current PMI cycle no longer reflects traditional seasonal patterns. New orders are rising rapidly, but material shortages and extended lead times are constraining production. Component availability is already having a clear impact on production schedules. Manufacturing activity could be even stronger if these supply bottlenecks ease.
HBM and Key Component Shortages Pass Electronics Price Hikes onto Consumers
Supply constraints have also begun to feed through to end-product prices. Lien said recent price increases for smartphones, computers, and other electronic products have been driven primarily by rising prices for memory and other critical components. Supply pressures are unlikely to ease significantly in the short term.
Overall, AI demand remains a major pillar of global manufacturing growth. However, supply chain bottlenecks and rising costs have emerged as key risks for the next phase. Taiwan’s ability to secure critical component supplies, strengthen supply chain resilience, and balance costs with capacity allocation as AI demand continues to expand will be crucial to sustaining growth in its manufacturing sector.
Source: United Daily News (September 2, 2026). PMIs Expand Across Asia and Europe, but Supply Chains Face Potential Production Bottlenecks. United Daily News. https://udn.com/news/story/7240/9728365