Taiwan’s manufacturing contraction persisted for the fourth consecutive month in August, reflecting ongoing sector challenges. The Taiwan Institute of Economic Research (TIER) reported that the composite index increased slightly to 9.24 points, up 0.88 from July. This improvement came from stronger technology shipments, a weaker Taiwan dollar, and reduced tariff impacts from the United States. Still, most manufacturing sectors remained in contraction.
TIER uses a five-color system to track economic performance, with blue indicating contraction. Despite some progress, traditional industries faced weak demand and stiff overseas competition. Many firms responded by scaling back output or adjusting production schedules. Consequently, the majority of sectors stayed in the blue-light zone.
Among industries, semiconductors showed notable improvement. Strong demand for artificial intelligence-related products and restocking of consumer electronics raised the sector’s rating from sluggish growth to stable growth in August. Conversely, the machinery sector continued contracting due to weak markets in the U.S., Europe, and Southeast Asia. Gains in semiconductor equipment demand could not counterbalance these setbacks.
Over 60 percent of industries remained in decline, highlighting an uneven recovery in Taiwan’s manufacturing. This unevenness poses challenges for the sector’s overall growth and resilience.
Looking forward, TIER emphasized that Taiwan’s manufacturing outlook depends heavily on developments in both the U.S. and China. In the U.S., tariff uncertainty has eased somewhat, but duties on semiconductors still remain unresolved. The Federal Reserve has also signaled a cooling labor market amid lingering inflation pressures linked to tariffs.
In China, government policies to reduce excessive market competition—known as “anti-involution” measures—may help ease deflation risks. However, the success of these policies in boosting consumer confidence and economic growth remains uncertain. TIER warned that global uncertainties will continue to challenge Taiwan’s manufacturing sector throughout the second half of 2025. Manufacturers are advised to stay vigilant and adapt to evolving risks.
