AI propels Dutch manufacturing output growth

Dutch manufacturing output grew in July at the fastest pace since the start of Russia's invasion of Ukraine at the end of February 2022. For the third month in a row, backlogs of work increased, a sign that the industry cannot keep up with the rapidly growing demand of recent months, partly due to staff shortages.

AI propels further growth

The growth of Dutch industry is probably largely driven by investments in data centres for AI applications. An analysis by S&P Global shows that exports from prominent semiconductor manufacturing hub Taiwan are growing the fastest, thanks to the rapidly growing demand for advanced chips for data centres, especially from the United States (US). The Netherlands is an important supplier to the global semiconductor industry, of which Taiwan's TSMC is the market leader, with chip machine manufacturer ASML, among others. The machinery industry, which is important for the Netherlands, has recently been growing by double digits compared to 2025, according to Statistics Netherlands. This strong growth is probably mostly driven by the explosive growth of demand for AI infrastructure.

The Netherlands is home to hundreds of industrial companies that supply parts to ASML. Part of the supply chain is being moved to Asia, especially for older generations of ‘deep ultraviolet’ (DUV) chip machines. Dutch industry is therefore likely to benefit mainly from the strongly growing demand for the latest ASML machines, which use so-called extreme ultraviolet (EUV) lithography.

Concerns about chip shortages

Conversations with entrepreneurs show that many are concerned about scarcity of semiconductors and other electronic components. According to figures from S&P Global, semiconductor prices are rising at a rapid pace. Only during the Covid-19 pandemic did chip prices rise even faster. This is likely to lead to a higher need for working capital for many Dutch companies, for example in the machinery industry and in the electrical engineering industry. The scarcity of electronic components, for example, has indeed rarely been seen in recent decades, according to figures from S&P Global. The shortages were more severe during the coronavirus pandemic, when supply chains were severely disrupted by lockdowns and sharply increased demand for electronics, but are currently similar to the chip shortages around 2019, when trade wars between the US and China and also Japan and South Korea led to hoarding behaviour for fear of trade restrictions.

Iran war continues to cause chaos

Meanwhile, the Iran war continues to cause chaos, mainly because the ceasefire that the US and Iran concluded in June turned out to be short-lived. Now that the Houthi militants from Yemen have also entered the military theatre, the risks to the oil and gas market have increased again. In the Netherlands, the chemical industry and especially the petroleum industry benefited from the disruption of global production chains in the spring. The closure of the Strait of Hormuz has led to scarcity of fuels and chemical products such as paint, which benefits manufacturers in and around the port of Rotterdam, for example. However, the ongoing war also caused uncertainty, for example with regard to the demand for machinery, an important export product of Dutch industry. Demand for German cars, for which the Dutch industry supplies many parts, could also come under pressure.

Despite the war in the Middle East, the picture for Dutch industry remains largely positive. Purchase prices are expected to continue to rise sharply due to the scarcity of chemical products, semiconductors and other electronic components, but thanks to strong demand, most Dutch companies are probably well able to pass on the increased costs.