Asian Manufacturing Activity Strengthens as AI Demand Boosts Semiconductor Sector

October 2026

Manufacturing activity across much of Asia strengthened in September, supported by growing global demand for semiconductors and artificial intelligence-related products. The expansion offered a positive signal for the region’s industrial economy, although rising energy prices and persistent cost pressures continued to pose challenges for manufacturers.

South Korea recorded one of the strongest improvements in the region. The country’s S&P Global manufacturing Purchasing Managers’ Index (PMI) rose to 53.9 in September, up from 52.3 in August and reaching its highest level since May. The index remained above the 50-point threshold that separates expansion from contraction for a tenth consecutive month.

South Korean export demand also grew at its fastest pace in around 15 and a half years. New orders and production recorded their strongest growth in roughly five and a half years, with strong activity in the semiconductor and automotive industries providing important support.

Taiwan also benefited significantly from the global AI boom. Its manufacturing PMI climbed to 56.7 in September, compared with 54.7 in August, reflecting strong demand related to artificial intelligence and semiconductors.

The latest data highlight the growing influence of AI investment on the broader manufacturing economy. Demand that initially centered on advanced chips and computing hardware is increasingly supporting activity across related technology supply chains.

Japan’s manufacturing sector continued to expand, although growth slowed. Its S&P Global manufacturing PMI fell to 54.1 in September, from 54.9 in August, marking the weakest expansion in six months. Despite the slowdown, new export orders increased for a ninth consecutive month, supported by demand from other Asian markets and stronger sales to the United States.

India also saw a notable improvement in manufacturing activity. Strong demand helped factory activity grow at its fastest pace in seven months, while also supporting employment and business confidence.

Elsewhere in Asia, manufacturing performance was mixed. Indonesia and Vietnam recorded expansions, while the Philippines and Malaysia experienced contractions. China’s manufacturing activity also returned to growth in September as disruptions caused by adverse weather conditions eased.

Despite the positive momentum generated by AI and semiconductor demand, manufacturers continue to face higher costs. Rising energy prices and other input costs remain a potential risk to the global economic outlook and could put pressure on companies’ profit margins and selling prices.

The September manufacturing surveys suggest that the global AI investment cycle is becoming an increasingly important source of industrial demand in Asia. At the same time, the uneven performance across countries shows that the region’s manufacturing recovery remains sensitive to domestic demand, export conditions, energy costs and global economic developments.

For the coming months, the strength and durability of AI-related investment will remain an important factor influencing semiconductor demand, technology exports and manufacturing activity across Asia.