Global Factory Activity Gains Momentum as AI Spending Drives Stronger Semiconductor, Capital Equipment and Manufacturing Demand Across Europe and Asia

Global Factory Activity Gains Momentum as AI Spending Drives Stronger Semiconductor, Capital Equipment and Manufacturing Demand Across Europe and Asia

RELEASE DATE:
Oct 2026Author:
Spherical InsightsManufacturing activity strengthened across Europe and Asia in September as AI-related investment lifted demand for semiconductors, machinery and other capital goods, although rising energy and input costs remain a challenge.Request Free SampleSpeak to Analyst

Manufacturing activity strengthened across Europe and Asia in September as AI-related investment lifted demand for semiconductors, machinery and other capital goods, although rising energy and input costs remain a challenge. 

Global factory activity strengthened in September as improving demand for technology and investment goods supported manufacturing across major economies. The Global Manufacturing PMI reached 53.0, its highest level since February 2022, indicating a broader expansion in industrial production and new orders. A major source of this momentum is rising investment in artificial intelligence infrastructure, which is increasing demand for semiconductors, servers, capital equipment and related industrial products. In Europe, the Eurozone Manufacturing PMI rose to 52.9, its highest level since May 2022, while manufacturing activity also strengthened in South Korea, Taiwan and India. South Korea recorded particularly strong export growth as demand for semiconductor and AI-related products increased. However, higher energy and input costs are creating pressure on manufacturers and raising production expenses. The recovery therefore matters beyond individual industries, as stronger factory output and trade demand could support industrial investment and global supply chains while cost pressures remain a key challenge. 

Why Is Global Factory Activity Strengthening? 

AI infrastructure is creating demand across a wider manufacturing chain, from advanced semiconductors and memory chips to servers, networking systems and electrical equipment. S&P Global said stronger goods demand in 2026 has reflected increased spending on AI infrastructure and defence equipment. The expansion is also reaching equipment suppliers as semiconductor manufacturers add production capacity. Taiwan’s machinery export orders rose 28.3% to $2.21 billion in August, providing a clear example of stronger demand for manufacturing equipment linked to the technology investment cycle. 

Investment in machinery and industrial equipment is providing another source of factory demand, particularly in Europe. Eurozone capital-goods output recorded its strongest expansion since the post-COVID recovery, with demand supported by AI and defence-related equipment. Germany also recorded stronger output and new orders among investment-goods producers. This indicates that the manufacturing recovery is extending beyond finished technology products into machinery and equipment used to expand industrial capacity. Such investment can increase orders for engineering, automation, electrical systems and other industrial suppliers across the manufacturing chain. 

Companies are rebuilding inventories and securing components as concerns over prices, supply disruptions and geopolitical uncertainty encourage manufacturers to strengthen their supply positions. S&P Global reported that inventory building, alongside AI infrastructure and defence spending, supported global goods demand in September. At the same time, supplier delivery times lengthened as raw-material availability and shipping delays created bottlenecks. Inventory rebuilding can therefore provide additional short-term support for factory orders, although its effect may weaken once companies restore stocks to desired levels. 

What Do the Latest Global Manufacturing Numbers Show? 

• Global: Manufacturing PMI reached 53.0 in September, the highest level since February 2022. Global production recorded its strongest increase since July 2021, while new orders also accelerated.  

• Eurozone: Manufacturing PMI rose to 52.9, up from 52.7 in August and the highest since May 2022. Output reached a 55-month high of 53.6, supported by investment-goods demand.  

• South Korea: Factory activity reached a four-month high, supported by strong semiconductor and export demand. Export orders grew at their fastest pace in 15.5 years.  

• Taiwan: Manufacturing PMI increased to 56.7, reflecting continued strength in semiconductor and AI-related demand.  

• India: Manufacturing activity reached a seven-month high, with PMI rising to 55.1 from 52.8 in August as domestic and international demand improved.  

• China: Official manufacturing PMI returned to expansion at 50.1, up from 49.8 in August, ending two months of contraction.  

• Japan: Manufacturing continued to expand, but PMI slowed to 54.1, a six-month low, showing that the regional recovery remains uneven.  

How Is AI Spending Affecting Semiconductor Demand? 

AI infrastructure investment is increasing demand for high-performance processors, memory chips, servers, networking components and the equipment used to manufacture advanced semiconductors. The effect is visible in South Korea’s latest trade data, where September exports reached a record $120.9 billion, up 83.5% year over year. Semiconductor exports surged 262.8% to $60.3 billion, accounting for about half of total exports, while computer exports jumped 435.3% to $7.0 billion. The figures show how AI infrastructure demand is moving beyond technology companies into semiconductor production, computing hardware and the wider manufacturing supply chain. 

Unlock exclusive market insights. Blog news—Download the Brochure now and dive deeper into the future of the Market

Europe’s Manufacturing Recovery and Capital Goods Demand 

Europe’s manufacturing recovery strengthened in September, with the Eurozone Manufacturing PMI rising to 52.9, its highest level since May 2022 and the fastest factory growth in more than four years. The output index reached 53.6, a 55-month high, while new orders increased at their fastest pace since early 2022 and export growth reached a more than four-and-a-half-year high. The recovery was supported by stronger demand for capital goods, particularly machinery and equipment linked to AI infrastructure and defence spending. The Netherlands led the expansion, Germany recorded solid growth, while France, Italy and Spain expanded more modestly. 

Which Asian Economies Are Driving Manufacturing Growth? 

• South Korea: South Korea is benefiting strongly from semiconductor and automotive demand. AI-related orders are supporting chip production, computing hardware and related industries, while improving factory activity shows that technology demand is translating into wider industrial growth. 

• Taiwan: Taiwan’s manufacturing expansion is closely connected to its semiconductor and electronics industries. Strong AI-related demand is supporting production of advanced chips, computing hardware and related components, strengthening the island’s position within the global technology supply chain. 

• India: India’s manufacturing sector is gaining momentum from stronger domestic and export demand. The expansion is becoming broader across industrial activity, supported by improving new orders, production and business confidence rather than depending mainly on semiconductor demand. 

• China: China’s manufacturing sector has returned to expansion, supported partly by improving technology and AI-related demand. However, the recovery remains uneven as weaker consumer spending, investment and property-sector activity continue to influence overall industrial performance. 

• Japan: Japan presents a more mixed manufacturing picture. Export orders remain supported by external technology and industrial demand, but factory momentum has weakened. This suggests that stronger international demand has not translated into equally strong overall manufacturing activity. 

What Is Driving Capital Equipment Demand? 

AI investment is creating demand across a wider capital-equipment chain, beginning with data centres and extending into power systems, electrical equipment, industrial machinery and factory automation. Expanding computing infrastructure requires transformers, cooling systems, power-management equipment and networking infrastructure, while semiconductor production requires specialised manufacturing equipment. Manufacturers are also investing in automation systems, precision machinery and factory equipment to increase capacity and improve production efficiency. This creates a broader industrial effect in which spending on AI infrastructure supports equipment suppliers beyond chipmakers, linking data-centre construction with machinery production, electrical systems and advanced industrial manufacturing. 

Which Industries Are Benefiting From Stronger Factory Demand? 

Semiconductor manufacturers continue to benefit from strong AI-related demand for advanced chips and memory. The broader equipment cycle is also strengthening capacity investment, with global semiconductor equipment billings reaching $40.53 billion in Q2 2026, up 23% year over year

Electronics manufacturers are benefiting from growing demand for computers, servers, networking equipment and other technology hardware. The expansion of AI infrastructure is increasing requirements across the electronics supply chain, while computers and electronics have remained among the key drivers of global manufacturing growth. 

Industrial manufacturing is benefiting as AI and defence investment increases demand for machinery, electrical systems, automation and other production equipment. The effect extends beyond technology companies, supporting higher-technology manufacturing and investment-related industries as factories expand capacity and modernise production systems. 

Main Risks to the Manufacturing Recovery 

• Geopolitical Risk: Middle East tensions and trade uncertainty could disrupt shipping routes, supply chains and access to critical materials. 

• Energy-Cost Risk: Higher oil and energy prices can increase factory operating costs and put pressure on manufacturers’ profit margins. 

• Input-Cost Risk: Rising prices for metals, components and other materials can increase production costs and force manufacturers to adjust prices. 

• Interest-Rate Risk: Higher borrowing costs can make factories, machinery and automation investments more expensive, potentially slowing capital expenditure. 

• AI Investment Concentration Risk: Manufacturing growth could become too dependent on AI infrastructure spending. A slowdown in AI investment could reduce demand for chips, equipment and related industrial products. 

How Are Semiconductor and Manufacturing Companies Responding? 

Semiconductor producers such as Samsung and SK Hynix are expanding their focus on high-performance memory and advanced chips to meet growing AI-related demand. Companies are also adjusting production capacity and supply strategies as demand shifts toward AI computing applications. 

Semiconductor and industrial equipment manufacturers are responding to higher capital spending by supplying advanced production systems, factory machinery and specialised equipment. Stronger investment in manufacturing capacity is creating opportunities for equipment suppliers across the technology and industrial sectors. 

Industrial manufacturers are increasing production capacity, improving automation and adjusting output to meet stronger demand for investment goods. Companies are also focusing on efficiency and supply-chain management to respond to changing orders, higher input costs and evolving industrial demand. 

AI infrastructure investment is likely to remain an important source of industrial demand, supporting semiconductor capacity expansion, capital equipment, automation and wider industrial investment. Over the medium term, stronger technology-related production could also support global trade and manufacturing supply chains. However, the durability of this recovery will depend on energy costs, interest rates and geopolitical conditions, which can influence investment decisions and production expenses. The key factor will be whether AI-driven demand broadens beyond the technology supply chain into wider industrial activity, creating a more balanced and sustainable manufacturing recovery. 

Global factory activity strengthened in September, with AI investment providing an important source of demand for semiconductors, capital equipment, electronics and industrial production across Europe and Asia. The recovery is supported by stronger orders, expanding production and increased investment in technology and manufacturing capacity, but growth remains uneven across economies. Manufacturers also face higher energy and input costs, financing pressures and geopolitical uncertainty that could affect investment and supply chains. The longer-term strength of global manufacturing will depend on whether AI-related demand broadens into wider industrial sectors, while companies maintain investment, improve efficiency and adapt to changing trade, cost and geopolitical conditions. 

Need help to buy this report?