Taipei: Taiwan's manufacturing sector experienced a rebound in March, driven by domestic demand and growth in AI-related areas, yet geopolitical risks in the Middle East continue to loom over the future outlook.
According to Focus Taiwan, the Taiwan Institute of Economic Research (TIER) released a statement highlighting a rise in the composite index for the manufacturing sector by 3.32 points, reaching 14.20 from a revised 10.88 in February. This increase marked the second-highest level in the past year, shifting the sector's signal from "yellow-blue" to "green," indicating stable conditions.
The recovery was primarily attributed to domestic factors such as post-Lunar New Year factory operations, inventory restocking, and enhanced demand for AI and high-performance computing applications, as reported by TIER. Export orders, industrial production, and imports showed stronger year-on-year growth, partly due to advance stockpiling by clients aiming to hedge against uncertainties from ongoing conflicts.
TIER noted a significant reduction in firms experiencing contraction, with a rise in those in stable and expansionary conditions. The chemical sector, in particular, rebounded sharply, with export orders and production seeing double-digit growth amid recovering semiconductor industry demand and geopolitical procurement concerns.
The electronics sector continued to thrive on strong demand for AI applications, cloud services, and new laptop launches, propelling its business climate indicator to "red," the highest level in TIER's five-color system, according to the statement.
However, TIER expressed caution regarding international developments as a major source of uncertainty. Heightened tensions in the Middle East raise concerns about potential energy supply disruptions, affecting oil prices, inflation, and global manufacturing activity, especially in Asia. Additionally, financial market volatility and ongoing trade policy uncertainties in major economies could impact global demand and supply chain stability.
TIER forecasts that sustained investment in AI and semiconductor technologies will bolster Taiwan's manufacturing sector, but warns that geopolitical risks and external demand fluctuations will remain crucial factors shaping its trajectory.