AI Demand Boosts March Manufacturing Business Climate to Green Light

(Central News Agency reporter Chao Min-Ya, Taipei, 30th) The Taiwan Institute of Economic Research (TIER) today announced the March manufacturing business climate signal. Benefiting from sustained strong demand for artificial intelligence (AI), factory restarts and inventory replenishment after the Lunar New Year, and companies' preemptive ordering in response to war uncertainties, the signal shifted from a yellow-blue light, representing an economic downturn, to a green light, indicating stability. TIER stated that while AI's growth momentum is expected to continue, close attention to changes in international situations is still necessary. The March manufacturing business climate signal value increased by 3.32 points, rising to 14.20 points, and the light turned green. TIER explained that the sustained strong demand for AI and high-performance computing applications, coupled with factory restarts and inventory replenishment after the Lunar New Year, and companies' increased willingness to stock up in response to war uncertainties, led to simultaneous expansion in the year-on-year growth rates of imports and exports, export orders, and production indices. Notably, the increase in the manufacturing production index set a new historical high. Observing the changes in different industry signals in March, the proportion of blue lights (representing decline) significantly decreased from 54.86% in February to 20.90% in March. The proportions of yellow-blue lights and green lights both increased, while yellow-red lights (representing ascent) decreased from 18.05% to 12.68%. Red lights (representing prosperity) significantly increased from 2.75% to 21.42%. Looking closely at industry performance, in the chemical products industry, the recovery in demand from commercial real estate and the semiconductor industry, coupled with customers' increased willingness to stock up due to the Middle East conflict, drove an increase in demand for coatings, industrial, and medical chemicals. The year-on-year growth rates of indicators such as export orders and production indices shifted from double-digit declines in the previous month to double-digit growth, boosting indicators related to raw material input and demand. The industry business climate signal shifted from a blue light (decline) to a yellow-red light (ascent). In the computer, electronic products, and optical products industry, the effect of new laptop products and strong demand for AI and cloud services led to a continuous increase in demand for laptops, servers, and network communication products. This significantly expanded the growth rates of indicators such as imports and exports, export orders, and production. The industry business climate signal shifted from a yellow-red light (ascent) to a red light (prosperity). TIER stated that even excluding the Lunar New Year factor, the March business climate signal value was still better than the average of the previous two months, indicating a significant improvement in the manufacturing business climate. Looking ahead, TIER pointed out that the continuous expansion of high-performance computing and AI applications, along with increased capital expenditure in the semiconductor industry, will continue to support the performance of electronics and machinery-related industries. However, the recent escalation of conflicts in the Middle East and energy risks, as well as persistent disagreements between the United States and Iran on key issues, mean that geopolitical uncertainty remains high. TIER further stated that if the conflict situation recurs, international oil prices may remain high and volatile, pushing up natural gas, shipping, and insurance costs. Financial markets may also fluctuate with stock markets, thereby creating multiple pressures on the global economy. TIER stated that for Taiwan, the growth momentum driven by AI investment is expected to continue. Coupled with the government's measures to stabilize oil prices and adjust tariffs, this will help alleviate short-term impacts. However, under persistent geopolitical risks, AI's supporting power may be limited. Subsequent attention needs to be paid to the impact of international situations and changes in the terminal market on the manufacturing business climate. (Editor: Chang Chun-Mao) 1150430