Asian factory activity expands thanks to global AI boom

Asian Factory Activity Surges in September on Global AI and Chip Demand

By Leika Kihara

Factory Activity Expands Across Asia Amid Global Economic Shifts

TOKYO, Oct 1 (Reuters) - Factory activity across Asia expanded in September thanks to the global AI boom, private surveys showed on Thursday, offering some relief to policymakers who are concerned about nagging cost pressures attributable to the US-Israeli war on Iran.

Export Powerhouses Lead Regional Growth

While a renewed rise in energy prices clouded the global economic outlook, export powerhouses Japan, South Korea and Taiwan saw manufacturing activity expand on solid demand for chips and artificial intelligence-related goods.

China's Factory Activity Rebounds

On Wednesday, surveys showed that China's factory activity also expanded last month as easing weather disruptions allowed factories to resume operations.

South Korea's Manufacturing Sector Sees Strongest Growth

South Korea, in particular, saw factory activity grow in September at the biggest margin in four months, as export demand grew at the fastest pace in 15-1/2 years.

Semiconductor and Automotive Sectors Drive Expansion

"Both new orders and production growth hit the highest for around five-and-a-half years, with anecdotal evidence often linking the expansions to the combined strength of the semiconductor and automotive sectors," said Usamah Bhatti, economist at S&P Global Market Intelligence, about South Korea.

South Korea's purchasing managers' index (PMI), published by S&P Global, stood at 53.9 in September, up from 52.3 in August, the highest level since May. The index remained above 50, which separates expansion from contraction, for a 10th consecutive month.

Taiwan and Japan Also Benefit from AI Boom

Taiwan, which is also reaping the benefits from the global AI boom, saw its PMI hit 56.7 in September, up from 54.7 in August.

Japan's S&P Global PMI stood at 54.1 in September, easing from 54.9 in August and marking the weakest pace of expansion in six months, as output and new orders slowed.

Strong Overseas Demand Supports Japanese Exports

Despite the slowdown, overseas demand remained strong; new export orders rose for a ninth straight month due to robust demand in Asia and improved sales to the US.

Cost Pressures Remain Elevated

Still, cost pressures remained elevated with firms continuing to raise selling prices at one of the sharpest rates since late 2022, the Japan PMI survey showed.

Mixed Results for Other Asian Economies

Factory activity for other Asian economies was patchy. While Indonesia and Vietnam saw activity expand, the Philippines and Malaysia contracted, surveys showed.

(Reporting by Leika Kihara; Editing by Thomas Derpinghaus)