Asia's electronics sector is showing solid signs of recovery, with the 53.6 August regional purchasing managers' index (PMI) the highest since November 2021, HSBC said in a recent release.

The rebound is being fueled by robust AI-related demand for advanced semiconductors and other electronic parts, which is offsetting weakness in traditional electronics, the equity research firm said.

However, producers have been absorbing rising input costs rather than passing them on to clients, leading to input prices rising as opposed to dropping output prices, HSBC said.

The sector also faces looming downside risks from proposed US sectoral tariffs on semiconductors, which could reach 100% for companies that do not commit to US production.