TAMI: Outlook Improves in 2026 as Semiconductor Equipment, AI Robotics, and Defense Industries Drive Machine Tool Recovery

As 2026 approaches, Taiwan's machinery and machine tool industry is cautiously optimistic about the outlook. David Chuang, Chairman of the Taiwan Association of Machinery Industry (TAMI), noted that U.S. tariffs, New Taiwan dollar exchange rates, and geopolitical tensions remain key uncertainties. Nevertheless, he expects "next year to outperform this year," forecasting machinery exports to grow by 5% to 10%, while machine tool exports aim to stabilize at roughly flat levels.

The Taiwanese machine tool sector struggled throughout 2025. According to Chairman Chuang, exchange rate pressures have already inflicted lasting damage on the industry, with disadvantages that are difficult to reverse. Looking ahead to 2026, he emphasized that beyond semiconductor equipment, accelerated development in AI robotics and the defense and military industries is essential. These three pillars, semiconductor equipment, AI robotics, and defense manufacturing, are expected to underpin the machine tool industry's return to growth.

Commenting on President Lai's announcement of a planned NT$1.25 trillion special defense budget over the next eight years to build a "Shield of Taiwan," along with the potential expansion of Taiwan–U.S. cooperation in unmanned aerial vehicles and other unmanned systems, Chairman Chuang said the defense and military sector represents a strategic area where the machine tool industry should actively invest and position itself for future growth.

Chairman Chuang believes that U.S. tariff policies are likely to be finalized in 2026. While the Russia-Ukraine war shows no immediate signs of resolution, he observes easing tensions in the U.S.–China trade conflict. On the condition that the New Taiwan dollar does not experience sharp fluctuations, he expects overall conditions next year to improve compared with this year. He is cautiously optimistic that the market will bottom out in the second quarter of 2026, followed by a gradual quarter-by-quarter recovery.

In terms of growth drivers for the machinery sector next year, Chairman Chuang highlighted artificial intelligence, high-performance computing, and cloud data services, which are boosting demand for semiconductors, electronics, and measurement and inspection equipment. Aerospace, defense, and robotics industries continue to perform strongly, while the automotive and electric vehicle sectors are also showing signs of recovery.

Chairman Chuang did not shy away from the challenges facing Taiwan's machine tool exporters. High-end five-axis machine tool exports have been negatively affected by Japan's weak yen, while mid- and low-end products face intense price competition from mainland China. He described the situation as being "pressed from above and below," leading to a sharp decline in machine tool exports this year.

Although the New Taiwan dollar has recently depreciated slightly, the magnitude remains far smaller than that of the Japanese yen or the Korean won. From 2021 through mid-December this year, the New Taiwan dollar depreciated by only 9.8%, while the Japanese yen fell by as much as 52.2%, a gap exceeding 42 percentage points. "This effectively means Japanese machine tools are being sold at a 40% discount," Chairman Chuang said. "Taiwanese products are clearly at a disadvantage; how can they remain competitive in international markets?”

According to TAMI statistics, Taiwan's machinery exports reached USD 28.866 billion in the first eleven months of this year, representing year-on-year growth of 8.5%. In New Taiwan dollar terms, exports totaled approximately NT$897.37 billion, up 5.3% year-on-year. Full-year machinery exports are expected to maintain growth of around 8%, with total annual machinery output still exceeding NT$1 trillion.

By contrast, cumulative machine tool exports for the first eleven months totaled only USD 1.828 billion, down 8.8% year-on-year, making it one of the hardest-hit segments within the machinery sector. The decline is primarily attributed to the relatively strong New Taiwan dollar compared with competitor currencies, as well as geopolitical factors such as the Russia–Ukraine war and the U.S.–China trade conflict, which have weakened global demand momentum.