Manufacturing sector experiences a 13.65% growth rate
By Meryl Kao / Staff reporter
Taiwan's industrial production index skyrocketed in the last month, hitting a three-month high of 106.1, a 13.65 percent annual growth. The first quarter also saw an 11.95 percent increase on a yearly basis. The rising demand for artificial intelligence (AI) and high-performance computing (HPC) applications has been driving this boom in the tech sector, according to the Ministry of Economic Affairs.
The manufacturing production index, a major component of the industrial production index, soared to 106.89, marking its 13th consecutive month of expansion with a 14.71 percent yearly growth. The index is projected to increase anywhere between 14.4 percent and 19 percent year-on-year next month.
Department of Statistics Deputy Director-General Huang Wei-jie forecasts a continued positive outlook for the AI industry, stating, "Although we're still unsure how the US tariffs on Taiwanese goods will be in the future, the growth in the AI sector has yet to slow down."
Electronic Components and Semiconductor Production
Production of electronic components grew a staggering 20.39 percent in the first quarter compared to the same period last year, as the AI and HPC businesses remained robust. Interestingly, semiconductor production expanded by 24.19 percent in the same period, thanks to the increased demand for 12-inch wafers, chip designing, testing, and packaging services, and flat panels.
Huang Wei-jie attributed part of this sharp increase in semiconductor production to front-loading demand by US clients seeking to stock up before US President Donald Trump's proposed tariffs on Taiwanese semiconductors.
Computers, Optical Components, and Machinery Equipment
The production of computers, electronic goods, and optical components surged by 27.08 percent in the quarter, spurred by strong demand for AI applications, cloud services, servers, semiconductor equipment, and phone lenses. Machinery equipment production also saw a rise of 10.59 percent in the first quarter, primarily due to expanded production capacity plans by leading chip companies, necessitating related equipment.
The Automotive Slump
In contrast, the production of automotive products fell by 11.18 percent in the first quarter because of decreasing orders. "As domestic vehicle inventory declines, the demand for related auto components also tends to decrease," said Huang. The competition from foreign automakers has added significant challenges to the sector.
Finally, the output of base metals, including steel, dropped by 7.11 percent in the first quarter due to various factors, including disruptions in the global steel recovery and necessary production equipment maintenance. Chemical materials and fertilizer productions also dipped by 2.63 percent in the period due to short-term shutdowns for maintenance and weak demand.
Key Insights
- Taiwan's semiconductor industry is doubling down on AI and advanced nodes (A14), aiming to lead the edge computing market for real-time AI inference.
- The automotive electronics sector is prioritizing AI-driven features for autonomous driving, in-vehicle AI assistants, and sensor fusion.
- U.S. tariffs are accelerating advanced chip onshoring, particularly in TSMC's Arizona plants. However, they heighten risks for legacy supply chains and automotive pricing.
- The growth in the AI sector is positive, but its future dependence on US markets remains uncertain due to potential tariff changes.
Sources: Taiwan News TechNode TechCrunch Nikkei Asia
- The rise in Taiwan's industrial production index, particularly in the manufacturing sector, is attributed to the growing demand for artificial intelligence (AI) and high-performance computing (HPC) applications.
- Huang Wei-jie, Deputy Director-General of the Department of Statistics, forecasts a continued positive outlook for the AI industry, despite uncertainties surrounding US tariffs on Taiwanese goods.
- The production of electronic components and semiconductors saw significant growth, partly due to front-loading demand by US clients seeking to stock up before potential tariffs.
- The production of computers, optical components, and machinery equipment also experienced growth, driven by strong demand for AI applications, cloud services, servers, and related equipment.
- In contrast, the automotive sector experienced a decline in production due to decreasing orders, with the competition from foreign automakers and US tariffs adding challenges to the industry. The automotive electronics sector, however, is prioritizing AI-driven features for autonomous driving and in-vehicle AI assistants.
