Taiwan’s factories surge at fastest pace in four years as AI demand fuels higher orders
The global appetite for semiconductors and AI technology powered manufacturing boom.
Taiwan's manufacturing sector roared ahead in February at its fastest pace in more than four years, as surging global demand for semiconductors and artificial intelligence technology sent output and new orders sharply higher — though the rapid expansion exposed mounting pressure across supply chains and stoked the steepest rise in costs in nearly three years.
The S&P Global Taiwan Manufacturing Purchasing Managers' Index climbed to 55.2 in February from 51.7 in January, its strongest reading since December 2021 and well above the 50-point threshold that separates growth from contraction.
The improvement marked the third consecutive month of strengthening conditions across the sector.
New orders grew at their quickest rate since July 2021, buoyed by stronger demand from customers both at home and overseas.
Export orders were particularly robust, with sales to Europe, Japan, mainland China and the United States all picking up pace.
Factory output expanded at the sharpest rate since mid-2021 in response, prompting firms to step up purchasing activity and build stocks at the fastest clip in four years.
The rush to secure inputs, however, is placing considerable strain on suppliers. Vendor delivery times deteriorated at the most pronounced pace since July 2024, as manufacturers reported that suppliers were struggling to hold sufficient stock to keep pace with demand — a bottleneck that analysts warn will only intensify as orders continue to climb.
Inflationary pressures also intensified. Average input costs rose at the steepest pace since April 2022, driven by a broad-based increase in raw material prices, and factories passed on higher costs to customers for the fifth month in succession, with selling prices rising at their quickest rate since mid-2022.
Despite the surge in activity, hiring remained tentative. Staffing levels grew only modestly in February, albeit at the strongest rate in nearly three and a half years.
The mismatch between swelling order books and cautious recruitment contributed to the sharpest accumulation of unfinished business since August 2021.
Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, said the results pointed to a sector in strong recovery but one that faces significant operational challenges ahead. She noted that whilst demand for semiconductors and other AI-related technology was ramping up worldwide and was likely to support the sector in the months ahead, it would add further pressure to supply chains already struggling to cope.
Business confidence nonetheless brightened, with firms expressing their greatest optimism about the 12-month production outlook since May 2024. Manufacturers generally expect global demand conditions to continue strengthening, lending support to forecasts of further output growth in the near term.
