Manufacturing sector stays sluggish but index rises

Taipei, Dec. 31 (CNA) Taiwan's manufacturing sector was sluggish for a third consecutive month in November but showed improvement from the previous month due largely to artificial intelligence-related gains, the Taiwan Institute of Economic Research (TIER) said Tuesday.

The composite index assessing the manufacturing sector's fundamentals rose 0.91 points from a month earlier to 12.29 to flash a "yellow-blue" light, indicating sluggishness, according to data compiled by the TIER, one of Taiwan's leading think tanks.

The TIER uses a five-color system to assess economic activity in the sector, with "red" indicating overheating, "yellow-red" showing fast growth, "green" representing stable growth, "yellow-blue" signaling sluggish growth, and "blue" meaning contraction.

Solid global demand for AI applications gave a boost to Taiwan's semiconductor and information and communications technology sectors, and local IC manufacturers' expansion plans strengthened equipment sales, helping push the index higher, the TIER said.

Non-tech sectors also reported an increase in production and outbound sales, giving additional momentum to the overall manufacturing index, the TIER added.

Among the five factors in the November index, three moved higher. The sub-indexes for purchases of raw materials, the general business climate, and pricing rose 0.52, 0.39 and 0.37 from a month earlier, according to the think tank.

The sub-indexes for demand and costs moved lower from a month earlier, however, by 0.24 and 0.14, respectively, the think tank said.

Citing a survey conducted in November, the TIER said 44.85 percent of respondents in the manufacturing sector said their business flashed a blue light, down from 47.83 percent in a similar poll in October, while 13.09 percent of them said their operations flashed a yellow-blue light, down from October's 22.86 percent.

Another 28.69 percent of respondents said their business flashed a green light in November, up from 24.97 percent in October, while 12.09 percent of them said their operations flashed a yellow-red light in November, up from 4.34 percent in October, the survey found.

In November, strong demand for AI and high performance computing (HPC) devices pushed up the output of pure wafer foundry operators, other IC manufacturers, and printed circuit board suppliers, helping the electronics component sector flash a green light in November.

The machinery industry also flashed a green light on the back of an increase in sales of high-end equipment, boosting its production and exports, the think tank said.

The chemical materials sector continued to flash a blue light, however, in the wake of a fall in international crude oil prices, and an increase in supply, and the base metal industry also flashed a blue light as the global steel market remained weak, the data showed.

Looking ahead, the TIER said the return of Donald Trump to the White House could influence the global economy as he has vowed to raise tariffs on goods from many countries but cut domestic taxes.

If China continues to see a production glut, it could dump products overseas, which could lead to an escalation of competition in the global economy, the TIER said.