Taiwan's manufacturing sector flashes to green light in December

Taipei, Feb. 5 (CNA) Taiwan's manufacturing sector showed signs of improving as an index reflecting the sector's fundamentals flashed a "green light" for December, indicating stable growth, the Taiwan Institute of Economic Research (TIER) said Wednesday.

The composite index rose 2.77 points from a month earlier to 14.87, its highest level in eight months, helping it return to the range of 13-16 points for a green light, up from a "yellow-blue" light in November, said the TIER, a leading Taiwanese think tank.

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.

The improvement was due largely to a strong year-end shopping season in the United States and strong demand for artificial intelligence (AI) applications and high-performance computing (HPC) devices, the think tank said.

It also attributed the index's rise to more than 20 percent annual growth in export orders and the production index and more than 30 percent growth in imports, which boosted the indicators for demand and purchases of raw materials, according to the TIER.

By industry, the growing AI- and HPC-related demand helped drive up production of 12-inch wafers, IC packaging and testing services, and motherboards and boosted the annual growth rate of imports and exports and production indexes.

As a result, the local electronics component industry flashed a "red" light in December, up from a "yellow-red" light a month earlier, the TIER said.

Looking ahead, the future remains uncertain for the manufacturing sector given that U.S. President Donald Trump has implemented or threatened tariffs on several economies, the TIER said.

Although Trump has agreed to pause tariffs on Canada and Mexico for a month, trade wars may continue to erupt, and countermeasures against the U.S. sanctions from various countries may increase the risk of a global economic downturn, according to the think tank.

The TIER said the United States can accelerate trade negotiations with various countries by raising import tariffs to reduce the trade deficit with them, but U.S. companies will inevitably pass on part or all of the increased import costs to consumers.

That may cause renewed inflationary pressures, directly affecting the U.S. economy and even the future development of the global economy, it said.

In addition, the think tank said the rise of Chinese startup DeepSeek means that the efficiency of AI models has improved, which is currently affecting the prices of U.S. technology stocks and Taiwan's related supply chain manufacturers.

In the future, adjustments in the production of high-end AI chips, the development of the AI industry chain, and U.S. restrictions on Chinese technology will be inevitable, and those changes will be important to watch, the TIER said.