Global AI wave revs up Asian factories, offsetting war-induced pain

[TOKYO] The global artificial intelligence boom powered Asia’s manufacturing sector in June, with brisk demand for technology-related goods offsetting the drag from the Iran war, business surveys showed on Wednesday (Jul 1).

This has offered some relief for the region’s export-reliant economies.

Price pressures, however, remained elevated as supply shortages and shipping delays lengthened lead times, suggesting the energy shock tied to the Middle East conflict could intensify across the region in coming months.

For now, the surveys underscore how the global AI investment wave is reshaping Asia’s economic fortunes.

Booming demand for chips, data-centre equipment and other technology goods provides a powerful engine for growth and acts as a critical buffer against mounting geopolitical and trade risks.

China, Japan and South Korea saw factory activity expand in June on solid demand for chips, computers and other AI-related products, as well as stockpiling by firms seeking to guard against shortages and price rises from the Middle East conflict.

China’s RatingDog General Manufacturing Purchasing Managers’ Index (PMI) hit 51.7 in June, expanding for a seventh straight month and exceeding the 50 mark separating growth from contraction, the survey showed on Wednesday.

It eased from 51.8 in May, but exceeded analysts’ forecast of 51.6.

The finding aligned with an official survey released on Tuesday showing that China’s factory activity had returned to expansion last month on robust export orders.

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“Overall, the manufacturing sector maintained a steady expansion in June, supported by sustained new order growth, easing cost pressures and improved labour market conditions,” Yao Yu, founder of RatingDog, said on China’s PMI.

Japan’s PMI rose to 54.8 in June from 54.5 in the prior month, expanding for a sixth consecutive month with new orders growing at their fastest pace in more than two years.

But input cost inflation stayed at a nearly four-year high in June, a sign of mounting price pressures that could crimp corporate margins and lead to broad-based inflation.

South Korea’s factory activity expanded for the seventh consecutive month, though at a slower pace than in May, on falling export demand.

“Firms frequently reported that rising raw material prices, alongside difficulties sourcing and receiving inputs due to delays and shortages, weighed on sector performance,” said Usamah Bhatti, economist at S&P Global Market Intelligence.

Factory activity in most Asian emerging economies continued to expand. The Philippines held steady at 50.9 in June from 50.8 in May, and Malaysia rose to 50.7 from 49.9 in May, the surveys showed.

Taiwan and Vietnam also saw factory activity expand in June, the surveys showed.

A separate survey showed India’s manufacturing sector expanded at its second-slowest pace in four years in June as export orders suffered from softer demand in Europe. REUTERS