AI Hardware Demand Drives Factory Expansion Across Asia Despite Rising Geopolitical Risks

Global Market: AI hardware demand powers Asia's manufacturing growth in August

AI hardware demand helped sustain manufacturing growth across several Asian economies in August, with China, Japan and South Korea recording expansion. Strong semiconductor and technology exports supported factory activity, while Taiwan, Malaysia and the Philippines also grew. However, the prolonged Middle East conflict and rising costs pose risks to the region's outlook. Surging global demand for artificial intelligence hardware helped sustain manufacturing activity across several Asian economies in August, offering a boost to the region's export outlook even as the prolonged Middle East conflict raised concerns over higher costs and economic uncertainty, Reuters reported. Factory activity expanded in China, Japan and South Korea during the month, with strong demand for semiconductors, computers and other AI-related products helping offset pressure from rising input costs, according to private business surveys released on Tuesday and reported by Reuters. US MarketsPowered By As on 01 Sep 2026, 01:30 AM IST S&P 500 Top Gainers CrowdStrike Holdings231.00(5.77%) Tesla367.95(5.51%) Coinbase Global188.12(5.31%) SLB60.10(4.83%) Gainers" S&P 500 Top Losers Edison Intl53.98(-23.07%) PG&E13.27(-20.06%) Aon321.52(-9.53%) Coterra Energy32.56(-8.62%) Losers" China factory activity strengthens China's RatingDog China General Manufacturing PMI, compiled by S&P Global, rose to 51.5 in August from 50.9 in July. The reading remained above the 50 threshold that separates expansion from contraction and exceeded the 51 forecast from economists surveyed by Reuters. The improvement added to signs that AI-related demand is helping stabilise parts of China's industrial sector. However, a separate official survey showed that overall manufacturing activity remained in contraction territory, highlighting the uneven nature of the country's economic recovery. The divergence between the private and official surveys suggests that export-oriented and technology-related manufacturers may be benefiting more strongly from the AI-driven demand cycle than the broader industrial economy. Japan sees strongest manufacturing growth in months Japan's manufacturing sector also gained momentum in August, supported by a sharp increase in new business linked to semiconductors and AI-related products. The S&P Global Japan Manufacturing PMI climbed to 54.9 in August from 54.5 in July, reaching its highest level since April. It also marked the eighth consecutive month of manufacturing expansion. According to Reuters, the increase in new orders was particularly encouraging as demand for AI-related equipment continues to support Japan's technology and electronics supply chains. South Korea benefits from export boom South Korea's manufacturing sector expanded for a ninth consecutive month, although the pace of growth moderated. The country's PMI fell to 52.3 in August from 53.1 in July, but remained comfortably above the 50 mark. Strong export demand continued to underpin factory activity, particularly in the semiconductor sector. Separate trade data showed South Korean exports surged 68.7% in August from a year earlier, extending their growth streak to 15 consecutive months. Reuters reported that the figures reflected continued strength in AI and semiconductor-related demand. The export surge provides an important tailwind for South Korea's manufacturing sector, where chipmakers remain major beneficiaries of the global investment boom in AI infrastructure. Taiwan, Malaysia and Philippines also expand Manufacturing activity also remained in expansion territory in Taiwan, Malaysia and the Philippines, although the pace varied across economies. Taiwan's PMI eased to 54.7 in August from 55.1 in July, while Malaysia's index slipped to 50.2 from 50.7. Both remained above the 50 threshold. The Philippines recorded the strongest improvement among the economies covered by the surveys. Its PMI jumped to 54.9 in August from 51.8 in July, pointing to a significant acceleration in factory activity. Indonesia, however, moved in the opposite direction, with its PMI falling to 49.8 from 50.2 in July, returning the sector to contraction. Middle East conflict remains a key risk Despite the encouraging manufacturing data, Asia's export-dependent economies face growing risks from geopolitical tensions and higher production costs. The prolonged Middle East conflict has pushed up energy and transportation costs, raising the prospect of renewed inflationary pressure for manufacturers. Higher oil prices could weigh on corporate margins and consumer demand while complicating monetary policy decisions across the region. For now, however, the strength of AI-related demand is helping cushion Asia's manufacturing sector. As reported by Reuters, robust demand for semiconductors, computers and other AI hardware is providing an important source of support for exporters even as geopolitical risks cloud the broader economic outlook. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

Singapore Manufacturing Activity Expands on Strong AI-Related Demand

SINGAPORE--A key gauge of Singapore's manufacturing activity rose in August, driven by strong artificial intelligence-related demand. The purchasing managers index, compiled by the Singapore Institute of Purchasing and Materials Management, rose to 51.5 in August, a tad higher than July's 51.4. A reading above 50 signals expansion, while a reading below 50 indicates contraction. The print reflected stronger growth in new orders, new exports, factory output, input purchases, and employment, SIPMM said Wednesday. The PMI for electronics, which accounts for about one-third of Singapore's manufacturing output, rose to 52.6 in August from 52.4 in July. The city-state has been a beneficiary of the AI wave, thanks to its role as a hub for integrated circuits, chip-making equipment and other AI-related components. Singapore's manufacturing sector remains supported by the AI-driven semiconductor supercycle, driving record order backlogs and robust employment, said Stephen Poh, executive director at SIPMM. "However, the deepening Middle East supply chain crisis continues to severely cripple supplier delivery times and send input prices, particularly energy costs, soaring," Poh added. Global geopolitical developments and the risk of a sharper-than-expected correction in AI-related investment could weaken global demand for semiconductors, memory chips and server-related products, said Barnabas Gan, group chief economist at RHB Bank, in a recent report. This would weigh on Singapore's electronics exports, industrial production and overall growth, given its role in the global semiconductor value chain, Gan added.

Global AI boom fuels Asia factory expansion in August

Sept 1 (Reuters) - Surging global demand for AI hardware kept Asia's factories humming in August, private surveys showed on Tuesday, brightening prospects for the export-reliant region even as the prolonged Middle East war fuels uncertainty and rising costs. China, Japan and South Korea saw factory activity expand in August on solid demand for chips, computers and other AI-related products, helping offset mounting cost pressures from the conflict. China's RatingDog China General Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 51.5 in August from 50.9 in July, staying above the 50-mark that separates growth from contraction. It also surpassed analysts' estimates in a Reuters poll of 51. The reading reinforced signs that AI-led demand is helping stabilise parts of China's industrial sector, although an official survey showed overall factory activity remained in contraction territory, underscoring the fragility of the broader recovery. Japan's manufacturing sector gathered momentum in August as new business grew at the fastest pace since January 2018 on solid demand for semiconductors and AI-related products. South Korea, too, saw factory activity expand for a ninth straight month due to robust export demand. The S&P Global Japan Manufacturing PMI rose to 54.9 in August from 54.5 in July, its highest since April and marking the eighth consecutive month of expansion, the survey showed. "Overall, the sector looks well placed to sustain its strong performance, particularly given demand linked to AI-related sectors," said Annabel Fiddes, economics associate director at S&P Global Market Intelligence. South Korea's PMI eased to 52.3 in August, from 53.1 in July, but was still above the 50 mark separating expansion from contraction for a ninth consecutive month. The expansion was driven by exports, which rose 68.7% in August from a year earlier to expand for the 15th straight month, separate data showed on Tuesday. David Owen, an economist at S&P Global Market Intelligence, said the robust increase in export demand was "an encouraging sign that firms are still benefiting from the current AI and semiconductor supercycle." Factory activity also expanded in Taiwan, Malaysia and the Philippines. Taiwan's PMI stood at 54.7 in August, compared with 55.1 in July, while that of Malaysia eased to 50.2 after a reading of 50.7 in July. The Philippines was a standout, with its PMI jumping to 54.9 from 51.8, although Indonesia's index dipped back into contraction territory at 49.8 from 50.2 in July, the surveys showed. (Reporting by Leika KiharaEditing by Shri Navaratnam)