LDN - Business

Weak tech demand shrinks Taiwan export orders, rebound tipped in third-quarter

[April 22, 2019] By Yimou Lee

TAIPEI (Reuters) - Taiwan's export orders fell for the fifth straight month in March, and at a much sharper pace than expected, as the island's manufacturers kept struggling with a drop in global tech demand.

Orders in March dropped 9 percent from a year earlier to $38.59 billion, Ministry of Economic Affairs data showed on Monday.

For January-March, export orders slid 8.4 percent, the biggest annual drop for a first quarter since 2009 when they tumbled 30 percent, the ministry said.

March orders fell at almost twice the 5.45 percent forecast in a Reuters poll, though the pace was less than February's 10.9 percent, the sharpest fall in nearly three years.

Taiwan's hi-tech factories are major suppliers for global tech heavyweights such as Apple Inc and Qualcomm, and the continued drop in orders suggests global electronic could remain soft for some time.

The ministry said the March shrinkage was also due to declining machinery orders due to business caution in China as the U.S-Sino trade dispute continues.

However, launches of smartphone models and demand for new technology such as artificial intelligence and 5G could support a rebound of orders for electronics in coming months, it said.

The faster 5G networks are coming on line in the United States, China, South Korea and other places this year, but probably will not be widespread until 2020. The telecommunications industry is expected to spend $275 billion over seven years in the United States alone, according to Accenture estimates.

Carl Liu, an analyst at KGI Securities, said Taiwan export orders "are unlikely to return to growth until in June, thanks to re-stocking of electronics ahead of the peak season in the third quarter".

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People fish in front of an Orient Overseas Container Line container ship, at Kaohsiung Port, Taiwan August 7, 2017. REUTERS/Tyrone Siu

CAUTION ON OUTLOOK

The ministry said it expects April export orders to decline 6.7-9.2 percent, and that it could be July before orders rebound.

"We remain cautious about orders in the first half and expect a year-on-year decline for the second quarter," ministry official Lin Lee-jen said.

The slowing tech demand has taken a toll on Taiwan's supply chain manufacturers. Chipmaker TSMC last week posted its steepest quarterly profit drop in more than seven years partly due to sluggish smartphone sales.

But the company gave an upbeat forecast for the coming months, betting on rising chip demand thanks to a rollout of 5G mobile network.

In March, weak export demand was seen from all Taiwan's major markets.

Orders from the United States fell 9.7 percent on-year, on top of February's 5.5 percent decline.

Those from China dropped 13.7 percent, compared with a fall of 14.3 percent the previous month, while orders from Europe slipped 2.4 percent. Japan orders declined 5.8 percent.

Taiwan's government in February trimmed its 2019 economic growth forecast to 2.27 percent, citing growing uncertainties over global growth.

(Reporting by Yimou Lee and Taipei newsroom; Editing by Richard Borsuk)

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