Middle East Tensions Ease, Taiwan Institute of Economic Research: May Manufacturing Climate Indicator Stays Green for 3rd Month

(CNA) -- With Middle East tensions cooling and demand for artificial intelligence (AI) remaining strong, Taiwan's manufacturing climate indicator remained in the "stable" green zone for the third consecutive month in May, reaching its highest point in over a year and nearing the "near boom" yellow-red light zone. The Taiwan Institute of Economic Research (TIER) stated that with continued support from the AI supply chain, the manufacturing sector is expected to maintain steady growth.

TIER announced its May manufacturing climate indicator on Tuesday. Driven by the AI industry chain boosting demand for exports and imports of electronic components and information and communication products, coupled with rising prices for electronic products, international raw material prices like crude oil and base metals, and a surge in domestic stock market prices and trading volume, manufacturers' outlook on the economy turned optimistic. The manufacturing climate signal value rose to 15.75 points in May, the highest since March 2025.

Although the May manufacturing climate indicator continued to show a green light, representing a stable economy, TIER pointed out that the signal value is approaching the threshold for the yellow-red light, indicating continuous improvement and upward momentum in the manufacturing sector.

Observing specific industries, the electronic components sector saw synchronized growth in orders and production due to strong demand for AI and high-performance computing. Global DRAM market shortages have led domestic manufacturers to maintain full capacity utilization, and high prices for traditional memory have pushed up contract prices. With electronic component exports, foreign orders, and production indices at high levels, the industry's climate indicator for May shifted from the "near boom" yellow-red light to the "boom" red light.

For the machinery and equipment industry, TIER analyzed that continued expansion in investments for semiconductor advanced processes, high-end packaging and testing, and automation equipment has driven demand for semiconductor equipment, mechanical transmission equipment, and related components. Exports have strengthened accordingly, with foreign orders and production indices maintaining double-digit growth. In May, the machinery and equipment industry's climate indicator shifted from green to yellow-red.

TIER noted that observing the changes in different industry lights in May, the proportion of declining blue lights significantly decreased from 13.69% in April to 2.45% in May. Yellow-blue and green lights saw slight increases, while yellow-red lights dropped to 17.61%. Red lights, representing economic prosperity, surged from 4.09% to 24.35%. In May, the proportion of red lights exceeded 20%.

Looking ahead, TIER stated that despite uncertainties from global trade policy changes and geopolitical situations, the Middle East situation is easing. The US and Iran have signed a memorandum of understanding, promoting a ceasefire agreement and the resumption of normal navigation in the Strait of Hormuz, which will help international oil prices fall and alleviate inflationary pressures from rising energy import costs.

TIER further analyzed that on the other hand, as AI computing power demand continues to expand, major cloud service providers are increasing capital expenditures, and various countries are accelerating their AI infrastructure development. This is expected to continue driving demand for Taiwan's semiconductor advanced processes, high-end packaging and testing, servers, and related supply chains, supporting export orders and manufacturing production momentum. (Editor: Lin Shu-yuan) 1150630

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