Taiwan’s export orders down 23 per cent, China and Hong Kong lead decline despite reopening
- Taiwan’s export orders fell by 23.2 per cent in December compared to a year earlier to US$52.17 billion
- Orders to Taiwan from its biggest buyer, mainland China and Hong Kong, fell for a ninth straight month in December after dropping by 37.7 per cent
Export orders from global tech hardware hub Taiwan plummeted again in December, officials in Taipei said on Tuesday, a sign of ongoing weak demand in the world’s largest economies.
Mainland China and Hong Kong led the decline in percentage terms even as the lifting of coronavirus controls began brightening the economy last month.
The value of export orders placed in Taiwan from around the world reached US$52.17 billion last month, down by 23.2 per cent compared to December 2021, Taiwan’s Ministry of Economic Affairs said.
We do expect that Taiwan will see a contraction in export orders as the semiconductor cycle is firmly on the downswing now
“We do expect that Taiwan will see a contraction in export orders as the semiconductor cycle is firmly on the downswing now, backed by an expected slowdown and pausing of tech upgrades by industries,” said Heron Lim, an economist with Moody’s Analytics.
“Both China and the US will contribute the most to the loss in volume.”
Orders to Taiwan from mainland China and Hong Kong fell for a ninth straight month in December as the value reached US$10.44 billion, representing a sharp 37.7 per cent fall, year on year.
“In December, orders are usually driven by Chinese New Year demand, so that’s something we should keep an eye on,” said Tony Phoo, an economist with Standard Chartered Bank in Taipei, who added that spending likely began well ahead of the Lunar New Year holiday.
After the easing of Beijing’s virus controls last month, Phoo said, mainland Chinese consumers could have shopped for electronic gadgets related to Taiwan’s tech supply chain, “but what I see is they prefer to travel overseas, which helps the service sector”.
Taiwan supplies around 60 per cent of the world’s semiconductors, including the most technologically advanced.
Smartphone sales in mainland China declined by 14 per cent year on year in 2022 to a decade low, Counterpoint Research said on Friday, due to “macroeconomic headwinds and the impact of Covid-19”.
China reopened its borders and abandoned all of its quarantine requirements earlier this month, its last step in ending three years of strict virus controls that had kept people away from workplaces and shopping venues.
Mainland China’s reopening, a key market for electronics, should help ultimately put a floor under regional trade
“Mainland China’s reopening, a key market for electronics, should help ultimately put a floor under regional trade,” said Frederic Neumann, chief Asia economist at HSBC in Hong Kong.
“In itself, however, the rebound in Chinese growth is unlikely to erase the woes in the global electronics sector, which still struggles with excess inventory and depressed order flows.”
In the inflation-weary United States, there is a 65 per cent chance of a “meaningful” downturn this year, according to consensus forecasts gathered by Goldman Sachs Research.
Consumers in Europe, a key market for electronic devices, struggled in late 2022 with inflation that raised heating bills and Goldman Sachs expects the euro zone economy to grow by just 0.6 per cent this year.
Taiwan lowers economic outlook to ‘dim’ as global trade weakens
Orders from the US to Taiwan dropped by 14.7 per cent in December, with orders from the European Union down by 23.9 per cent, ministry data showed.
Purchases of Taiwan’s consumer electronics, the top export order category at US$17.12 billion, fell by 20.9 per cent year on year in December, while orders for information and communication products dropped by 21.4 per cent to US$16.43 billion.
Technology contributes around 30 per cent to Taiwan’s gross domestic product, which the government’s budget office forecasts will reach US$785 billion this year.
Smartphones and notebook PCs sold to end users worldwide are likely to keep declining in early 2023, said Jay Yang, deputy director general of the Market Intelligence & Consulting Institute in Taipei.
The commercial market, they would have to eliminate some older PCs as they have a replacement cycle
But corporate replacements of office PCs should help to stabilise the technology sector by late in the year, Yang added.
“The commercial market, they would have to eliminate some older PCs as they have a replacement cycle,” he said.
But he cautioned that “notebook PCs for the consumer market are in a bad year, also mobile phones”.
Demand from server farms and steady orders for automotive chips will further buoy Taiwan’s technology sector, Yang added.
Car chip demand set to fuel Taiwan output in 2023 despite slowing exports
Worldwide server spending will slow this year, but see a 10.2 per cent compound annual growth rate over the next five years, market research firm IDC said in December.
The global market for automotive semiconductors was valued at US$41.78 billion in 2021 and will reach US$110.93 billion by 2030, fellow market research firm Spherical Insights forecasts.
Much of that demand will come from electric car sales in countries that are reducing their use of fossil fuel-powered vehicles, the report added.
