Asia factory activity firms on AI-driven export orders

Asia’s manufacturing powerhouses closed 2025 on a strong note, with factory activity in several key economies returning to expansion as export orders improved, supported by surging global demand linked to artificial intelligence.

The latest Purchasing Managers’ Index (PMI) data from S&P Global, released on Friday (January 2), showed factory activity in major technology exporters South Korea and Taiwan ending a prolonged downturn and recovering in December. Most Southeast Asian economies also maintained rapid growth.

The trend is consistent with China’s PMI data released on Tuesday, which pointed to an unexpectedly strong turnaround in factory activity in the world’s second-largest economy, helped by a pre-holiday surge in orders.

While it is still too early to conclude that Asia’s major exporters have fully adjusted to potential US tariff barriers, the rebound in global demand has provided manufacturers with fresh optimism heading into 2026.

Shivaan Tandon, a regional Asia economist at Capital Economics, said export figures in many countries have jumped in recent months, and the near-term outlook for Asia’s export-oriented manufacturing remains positive. He cited benefits from the United States shifting some import demand away from China and continued strong global demand for AI-related hardware.

Taiwan and South Korea benefit from the AI chip boom

One of the most notable improvements was in Taiwan, where the PMI rose to 50.9 in December from 48.8 in November, breaking above the 50-point line — the threshold separating expansion from contraction — for the first time in 10 months.

Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said Taiwan’s manufacturing sector ended 2025 on a “high note”, with companies signalling increased output and new business as demand conditions strengthened. She added there were signs firms expect the recovery to continue into 2026, with manufacturers building inventories and expressing greater optimism about future output.

South Korea’s PMI moved in the same direction, rising to 50.1 from 49.4 — the first expansionary reading since September. Both economies are among the world’s largest semiconductor manufacturing bases, and have benefited significantly from booming AI-related demand.

South Korea’s PMI survey also showed new orders rising at the fastest pace since November 2024. Usamah Bhatti, an economist at S&P Global Market Intelligence, said new product launches and improved overseas demand helped lift sales, while business confidence rose to its highest level since May 2022. That, he said, encouraged firms to increase hiring and purchasing.

Official data released on Thursday also showed South Korea’s exports — a key barometer for global trade — outperformed analysts’ forecasts in December.

Southeast Asia mostly holds growth; Japan PMI still due

Elsewhere in Asia, factory activity in most economies continued to expand, although Indonesia and Vietnam recorded slight moderations. India’s manufacturing activity slowed to its weakest growth rate in two years, but still remained among the strongest in the region.

Separately, Singapore reported that economic growth in 2025 improved to 4.8%, up from 4.4% in 2024, with quarterly growth also beating expectations.

S&P Global is due to release Japan’s PMI on Monday, which will complete the latest regional picture for Asia’s manufacturing sector.

Source: Reuters