Asia's factories end 2025 on firmer footing as orders pick up
Most Asian economies should continue to benefit from a shift in US demand away from China and strong global demand for AI-related hardware
Summary
- Asia's factory activity rebounds with growth in key economies
- Taiwan and South Korea PMIs show expansion after months of decline
- New product launches and demand boost semiconductor manufacturers
Asia's factory powerhouses closed 2025 on a firmer footing, with activity swinging back to growth in several key economies as export orders picked up, helped by new product launches and blistering demand for artificial intelligence.
Purchasing managers' indexes (PMIs) released by S&P Global today (2 January) showed factory activity in the major tech-exporting economies of South Korea and Taiwan snapping months of declines in December, while most Southeast Asian nations maintained brisk growth.
Keep updated, follow The Business Standard's Google news channel
They followed PMIs released for China on 30 December 2025, which also showed an unexpected turnaround in factory activity in the world's second-largest economy, helped by a pre-holiday surge in orders.
While it is too early to say whether Asia's largest exporters are adjusting to US tariffs, a pickup in global demand had given some manufacturers cause for optimism heading into the new year.
"Exports from most countries have surged in recent months, and we think the near-term outlook for Asia's export-oriented manufacturing sectors remains favourable," said Shivaan Tandon, Asia Economist with Capital Economics.
He noted most Asian economies should continue to benefit from a shift in US demand away from China and strong global demand for AI-related hardware.
Taiwan's PMI rose to 50.9 in December from 48.8 in November, breaking above the 50-point mark that separates growth from contraction for the first time in 10 months.
"Taiwan's manufacturing sector ended 2025 on a high, with firms signalling fresh increases in production and overall new business amid reports of firmer demand conditions," said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence.
"There were signs that companies anticipate the recovery to continue into 2026, with manufacturers building their inventories and expressing stronger optimism around future output."
Similarly, South Korea's PMI rose to 50.1 from 49.4, the first expansionary reading since September.
Both economies are among the world's largest manufacturers of semiconductors, which have benefited enormously from a booming market for artificial intelligence.
South Korea's PMI survey showed the steepest rise in new orders since November 2024.
"According to manufacturers, new product launches and improved external demand drove the improvement in sales, while confidence in the outlook also improved markedly in December to reach its highest level since May 2022," said Usamah Bhatti, economist at S&P Global Market Intelligence. "In turn, firms were encouraged to raise both employment levels and purchasing activity."
Official data released yesterday (1 January) showed exports from South Korea, a bellwether for global trade, beat forecasts in December.
Elsewhere in Asia, factories mostly sustained activity growth, although Indonesia and Vietnam reported slight moderations in expansion.
India's factory sector activity slowed to its weakest growth in two years, although the pace is still among the region's strongest.
Separately, Singapore on Friday reported a pickup in economic growth for 2025 to 4.8% from 4.4% in 2024, while the quarterly growth beat forecasts.
S&P Global will release the Japanese PMI on 5 January.
