Taiwan's manufacturing purchasing managers' index climbed to 63.4 points in September, its highest reading since August 2021, the Chung-Hua Institution for Economic Research (CIER) said, Focus Taiwan reported on October 1.

The gain of 0.9 points from August extends a run of expansion driven by demand tied to artificial intelligence applications, which has turned the island's electronics producers into one of the main engines of global technology supply. Readings above 50 indicate expansion, while those below 50 point to contraction.

The electronics and optical industry, the principal driver of the manufacturing index over the past year, stayed elevated at 62.6% but lost momentum, falling 2.6 points from the previous month, CIER said.

Order momentum within that category retreated by more than 10 percentage points. Unfulfilled orders fell 11.7 percentage points to 54.3%, the slowest rate of expansion since December 2025.

Jerry Pai, a consultant at the Supply Management Institute, Taiwan (SMIT), said the sector was "on a high plateau," with overall momentum easing but still strong. He added that future demand momentum, supply chain bottlenecks and inventory swings deserved close attention.

CIER President Lien Hsien-ming said that although the market harbours doubts about the speed of AI demand growth, actual demand remains very strong, with no current signs of an AI bubble.

Electrical and machinery equipment led all sectors measured in the index at 64.4%, ahead of basic materials at 56.7%, chemical and biomedical industries at 56.2%, food and textiles at 56.1% and transportation equipment at 53.2%, according to CIER.

The index is compiled from surveys of purchasing and supply chain executives, who report whether business conditions have improved, worsened or stayed the same across variables including new orders, production, employment and inventories over the preceding month.