AI Sparks Fresh Momentum in Asia’s Manufacturing Sector

The rapid expansion of artificial intelligence (AI) continued to support Asia’s manufacturing sector in June, as strong global demand for technology products helped offset economic uncertainty caused by the recent conflict involving Iran. Business surveys released on Wednesday indicated that the region’s export-driven economies benefited from rising orders for AI-related products, providing stability despite ongoing geopolitical tensions.

Manufacturers across Asia continued to experience higher costs as supply shortages and shipping disruptions extended delivery times. These challenges suggest that energy-related pressures linked to instability in the Middle East could have a greater impact on production costs in the months ahead. Nevertheless, the continued surge in global investment in AI has strengthened demand for semiconductors, data centre equipment, computers, and other advanced technology products, reinforcing the manufacturing sector’s resilience.

China, Japan, and South Korea all recorded growth in factory activity during June, supported by strong demand for AI-related goods and precautionary stockpiling by businesses concerned about possible supply disruptions and rising costs. Companies increased inventories to prepare for potential shortages resulting from geopolitical uncertainties.

China’s RatingDog General Manufacturing Purchasing Managers’ Index (PMI) registered 51.7 in June, marking the seventh consecutive month of expansion. Although slightly lower than May’s reading of 51.8, the figure remained above the 50-point threshold that separates expansion from contraction and exceeded analysts’ expectations of 51.6. The results were consistent with China’s official manufacturing survey, which also reported a return to expansion driven by stronger export demand.

According to RatingDog founder Yao Yu, China’s manufacturing sector maintained stable growth during June due to continued increases in new orders, easing production costs, and improving employment conditions.

Japan’s manufacturing sector also continued its positive momentum, with the PMI increasing to 54.8 from 54.5 in May. This marked the sixth consecutive month of expansion, while new orders recorded their fastest growth in more than two years. Despite the encouraging performance, manufacturers continued to face elevated input costs, with inflation remaining near its highest level in almost four years. Persistent cost pressures may reduce corporate profitability and contribute to broader inflationary trends.

South Korea’s manufacturing sector expanded for the seventh straight month, although growth moderated compared with May as export demand weakened. Businesses reported that rising raw material prices, combined with shortages and delivery delays for essential inputs, continued to hinder production and overall sector performance.

Manufacturing conditions also remained positive across several emerging Asian economies. The Philippines maintained steady expansion with a PMI of 50.9 in June, slightly above May’s 50.8 reading. Malaysia returned to growth with a PMI of 50.7 after recording 49.9 in May. Taiwan and Vietnam likewise reported expanding manufacturing activity during the month, reflecting continued regional strength.

In contrast, India’s manufacturing sector grew at its second-slowest pace in four years during June. The slowdown was largely attributed to weaker export orders, particularly as demand from European markets softened, highlighting the uneven impact of global economic conditions across the region.