Taiwan Manufacturing Index Falls 0.9 Point to 62.5% in October
Key Facts
Taiwan’s manufacturing sector expanded at a slower pace in October, with the seasonally adjusted Purchasing Managers’ Index falling 0.9 percentage point to 62.5%, according to data from the Chung-Hua Institution for Economic Research. The index remained above 50%, the dividing line between expansion and contraction, for a 13th consecutive month. The decline followed a 0.9-point rise in September to 63.4%, then the fastest expansion since August 2021. The institute said new orders, production and employment continued to expand despite the slowdown in the headline index. The supplier deliveries index also remained elevated, while the inventory index stayed in expansion territory, signaling continued activity alongside supply pressures.
The new orders index fell 0.4 point to 63.2%, but remained above 60%, indicating that orders continued to grow, though at a slower pace. At the same time, the backlog of orders index fell to 53.9%, marking its slowest expansion since January 2026. The divergence between incoming new orders and accumulated work indicates that factories are still receiving orders, but are no longer clearing backlogs as quickly. The institute said the supplier delivery times and raw material prices indexes remained near 70% in October. The elevated readings were associated with longer delivery times and rising cost pressures as demand continued to expand.
The slowdown was more pronounced in electronics and optics, where the sector index fell 2.6 points to 60.0%, its slowest expansion since March 2026. Still, the institute said demand for AI servers and advanced electronic applications remained relatively strong. In the same sector, the supplier deliveries index registered 73.4%, while the inventory index was 64.4%. The unadjusted new orders index fell 4.0 points to 52.7%, nearing the contraction threshold without dropping below it. The institute attributed delivery pressures to shortages of key materials and imbalances in the availability of short- and long-term materials, factors affecting order fulfillment.
The institute said customer inventories in the electronics and optics sector remained higher than needed for a second consecutive month, with the index posting its highest reading since November 2022. Weak consumer demand for consumer electronics affected the performance of some components and chip design, according to the institute’s report. This highlights a divergence within Taiwan’s technology supply chain: demand from data centers and advanced applications remained relatively resilient, while other parts of the electronics market faced weaker end-consumer demand. Alongside material and delivery bottlenecks, accumulated customer inventories are limiting how quickly demand can be converted into shipments. The institute said improved material supplies and companies’ ability to deliver orders will affect manufacturing momentum in 2027.
By contrast, the electrical and machinery equipment sector continued to expand at a stronger pace, with its index rising 0.1 point to 64.5% and its new orders index reaching 71.3%. The sector’s six-month outlook index rose to 75.0%. The institute linked demand to investment in building AI data centers, upgrading electricity infrastructure, and expanding production capacity for advanced semiconductor manufacturing and advanced packaging. The sector recorded its fastest expansion since August 2021, according to the institute. Expansion extended to all six manufacturing sectors covered by the survey; electrical and machinery equipment led at 64.5%, followed by electronics and optics at 60.0%, while the food and textiles index was 54.8%.
For manufacturing as a whole, the six-month outlook index rose 0.3 point to 61.7%, remaining above 60% for a 10th consecutive month. The reading keeps the outlook in expansion territory, alongside continued divergence in sector performance and pressure on materials and deliveries. The institute noted that manufacturing orders in electrical and machinery equipment are benefiting from infrastructure investment linked to data centers and advanced chips. By contrast, it said elevated customer inventories and shortages of key materials remain factors affecting order deliveries. Factories’ ability to improve supplies and work through backlogs will determine the sector’s momentum in 2027.