Innolux bullish over LCD market

LCD panel maker Innolux Corp (群創) yesterday said it is bullish about panel demand over next 12 months as the COVID-19 pandemic continues to drive demand for notebook computers, tablets and TVs. The Miaoli County-based company said that the pandemic has boosted demand for electronic devices as workers and students increasingly work and study remotely, leading to strong revenue growth and portending a profitable quarter for the panel maker. Innolux has posted losses for the past seven quarters. “Our competitors have said that strong orders will extend through December, and even to the first quarter of next year, but we are confident to say that our business outlook is even better than that,” company chairman Jim Hung (洪進揚) told a media briefing in Taipei. “We believe that the stay-at-home economy will drive a sustainable growth, even during the post-pandemic era,” Hung said. “We are bullish about our business outlook. For the whole of next year, demand will not be a problem.” Laptops, tablets, TVs and other devices benefit from this wave of demand, Hung said. As a result, the industry is in a healthy condition due to balanced demand and supply for LCD panels as Samsung Electronics Co phases out panel production, he said. The prices of 55-inch TV panels jumped 6.9 percent per unit this month from the prior month due to tight supply, while panels for notebook computers climbed 3.2 percent, TrendForce Corp (集邦科技) data released on Tuesday showed. This quarter, prices of large flat panels would surge 10 percent from the previous quarter, TrendForce said, adding that supply crunch of driver integrated circuits used in displays and chips poses a problem for shipments of certain panels. Innolux would try to satisfy demand primarily for panels used in information technology applications, Innolux vice president James Yang (楊柱祥) said. Innolux yesterday unveiled its first flat-panel satellite antenna

By Lisa Wang

ITRI, Synopsis to set up joint artificial intelligence chip laboratory in Hsinchu

The Industrial Technology Research Institute (ITRI, 工研院) and US-based electronic design automation solution developer Synopsys Inc yesterday announced the establishment of a new laboratory in Taiwan, which is expected to speed up artificial intelligence (AI) chip development in the local semiconductor industry. The AI Chip Design Lab aims to provide Taiwanese IC design houses with access to advanced design tools and design and verification services, lowering the barrier of entry to AI, ITRI and Synopsys said. The facility is expected to shorten time to market for AI chips from two-and-a-half years to six months and enhance AI chip performance by 25 percent, Synopsys Asia Pacific senior vice president David Lin (林榮堅) said yesterday at the laboratory, located at ITRI headquarters in Hsinchu. It is scheduled to officially start operations in October next year. For the joint project, Synopsys would provide chip design tools, while ITRI would provide design and verification services, Lin said. “There are a lot of painful points for medium and small design houses seeking to incorporate AI into their products,” ITRI Information and Communication Research Laboratories general director Chiueh Tzi-cker (闕志克) said. “They might not understand the algorithm. Even if they do, they might not know how to develop the processor architecture that will faithfully and efficiently execute the algorithm.” Chiueh described Taiwan as a “distant second” to the US when it comes to IC design. “On the one hand, top Taiwanese companies like MediaTek Inc (聯發科) are creating sophisticated system-on-chip smartphone processors,” Chiueh said. “But most smaller Taiwanese companies are working with lower-level chips found in devices such as USB drives and Bluetooth speakers.” It is difficult for Taiwanese companies, especially medium and small design houses, to break into high-end IC design, he said, but added that firms could add value to their IC products by deploying AI. “For instance, if a company already

By Angelica Oung

Cathay Pacific announces rearranged Taiwan flights

JOBS AT RISK? Most Cathay Dragon routes are to be operated by Cathay Pacific or a subsidiary, but it was unclear how Taiwanese workers would be affected

Cathay Pacific Airways Ltd (國泰航空) yesterday said it is planning new flight services for Taiwan as it announced a corporate restructuring that included the shutdown of its regional subsidiary, Cathay Dragon (國泰港龍), and could lead to job cuts in Taiwan. Cathay Pacific said the shutdown means that the one round-trip service between Taichung and Hong Kong per day and seven round-trip services between Kaohsiung and Hong Kong operated by Cathay Dragon prior to the COVID-19 pandemic would be terminated. “The parent company is planning a new schedule between Taiwan and Hong Kong,” Cathay Pacific assistant manager for corporate communications Moses Hou (侯恩錫) said. Cathay Pacific could operate Cathay Dragon’s routes on its own, particularly because the Kaohsiung market is promising, Hou said. The carrier said that its actual plans have yet to be hammered out. “It is intended that regulatory approval will be sought for a majority of Cathay Dragon’s routes to be operated by Cathay Pacific and HK Express Airways Ltd (香港快運航空), a wholly owned subsidiary,” the carrier said in its statement announcing its restructuring plan. Cathay Pacific operated 15 round-trip services a day between Taoyuan and Hong Kong, as well as single daily flights on the Taoyuan-Tokyo, Taoyuan-Osaka, Taoyuan-Fukuoka and Taoyuan-Seoul routes before the pandemic restricted air travel. The airline has not served Taiwan since March because of the pandemic. The route disruption was the result of a corporate restructuring announced by Cathay Pacific earlier yesterday in response to the effect of the COVID-19 pandemic on the aviation market. The company would cut approximately 8,500 positions across its entire group, which accounts for about 24 percent of its total workforce, it said in a statement. This means that about 5,300 Hong Kong-based employees would be made redundant and about 600 employees based outside of Hong Kong could also be affected, subject to local regulatory requirements, the statement

CTBC Bank awards honor its digital innovation

CTBC Bank (中國信託銀行) chairman Morris Li (利明獻) on Thursday last week was named The Asian Banker’s Best CEO in Taiwan for leading innovation by utilizing digital technology amid the COVID-19 pandemic. CTBC was also named Best Managed Bank in Taiwan for cooperating with the government to provide worker bailout funds, effectively addressing public need through capital management. It was the only financial institution in Taiwan to receive that award. Speaking at an online awards ceremony, Li thanked the financial information company for the substantial encouragement it had given the CTBC team in such difficult times. During the pandemic, CTBC handled in six weeks cases that would normally require two years to process, including more than 280,000 labor bailout applications, with about 230,000 of them approved, Li said. The efficiency of the loan service is high, because the bank has an all-digital platform for applications, a smart review system and automated processing — three “digital strengths” of the bank, he said. The agility of its customer-centered staff is another reason for CTBC’s success, Li said, adding that more than 2,600 employees contributed to the bank’s bailout services. While the pandemic affected revenue in many industries, CTBC introduced preferential mortgage, personal loan, credit card interest rate and corporate revolving loan packages to relieve the burden on people, and small and medium-sized enterprises, he said. Discounts were introduced in April for businesses at the CTBC Financial Park (中國信託金融園區) in Taipei’s Nangang District (南港), with the highest rent decrease being 86 percent, he said. Li extended appreciation to all CTBC employees in Taiwan and abroad for fulfilling the corporate spirit of “We are family” by swiftly addressing customers’ needs at all times. The Asian Banker Leadership Achievement Awards Program is held every three years. It is widely acknowledged in the financial services industry as the highest accolade for professionals in the industry in the Asia-Pacific,

Taiwan Business Quick Take

STOCK MARKETS TAIEX closes slightly higher The TAIEX closed slightly higher yesterday as market sentiment remained cautious over the Nov. 3 US presidential election. Contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) was again the anchor stabilizing the broader market, preventing the main board from falling into negative territory at the end of the session, dealers said. The TAIEX closed up 14.88 points, or 0.12 percent, at 12,877.25, on turnover of NT$167.982 billion (US$5.81 billion). TSMC, the most heavily weighted stock on the local market, rose 0.44 percent after fluctuating between NT$451 and NT$456. The semiconductor subindex and the bellwether electronics sector closed up 0.39 percent and 0.19 percent respectively. Foreign institutional investors sold a net NT$599 million of Taiwanese shares on the main board yesterday, Taiwan Stock Exchange data showed. ELECTRONICS Alltop approves reduction Alltop Technology Co (凡甲科技), which supplies connectors for electronic devices and cables for servers, yesterday said that its board of directors approved a capital reduction scheme in which the company would cut 25 percent of its capitalization to NT$546.87 million and shareholders would be paid NT$2.5 per share. As the company sees no urgent need for capital for the time being, it expects that the reduction would increase shareholder returns and help it adjust its capital structure, it said. Shareholders are to vote on the scheme at the firm’s annual general meeting on Dec. 10, after which it would need regulatory approval, Alltop said in a filing. The plan should be completed by the first quarter of next year. Alltop reported cumulative revenue of NT$1.6 billion in the first three quarters of this year, up 13.6 percent from a year earlier. INTEGRATED CIRCUITS ALi denies Wi-Fi report Set-top box IC designer ALi Corp (揚智科技) yesterday denied an Economic Daily News report that it is setting up a Wi-Fi 6 team of 20 people

US slaps Google with antitrust lawsuit

MONOPOLY ACCUSATIONS: The largest such case since 1998 comes after months of investigations, but might be largely politically motivated, a law professor said

The US government on Tuesday filed a blockbuster lawsuit accusing Google of maintaining an “illegal monopoly” in online search and advertising in the country’s biggest antitrust case in decades — opening the door to a potential breakup of the Silicon Valley titan. The politically charged case, which could take years to play out, draws new battle lines between the US government and big tech with potentially major implications for the sector. US Deputy Attorney General Jeffrey Rosen said that the case filed with Republican state attorneys general from 11 states takes aim at Google’s dominance of the online ecosystem. “Google is the gateway to the Internet,” Rosen said. “But it has maintained its monopoly through exclusionary practices that are harmful to competition.” The suit said that these practices include long-term agreements requiring that Google search be pre-loaded on devices and making it impossible to delete some of its apps. The US government accuses Google of paying billions of US dollars to maintain that position, thus reinforcing its monopoly. The lawsuit filed in Washington contends that Google’s actions shut out competitors and proposes that the court consider a range of remedies. The filing calls for the court to “enjoin Google” from anticompetitive practices and consider “structural” changes to the company — which could mean breaking it up. Google called the lawsuit “deeply flawed.” “People use Google because they choose to — not because they’re forced to or because they can’t find alternatives,” Google general counsel Kent Walker said in a blog post. “This lawsuit would do nothing to help consumers. To the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices and make it harder for people to get the search services they want to use.” The move comes after months of investigations by US federal and state antitrust enforcers seeking to check the company’s power and

Netflix falls short of Q3 new-subscriber projections

STRONG COMPETITORS: With other firms’ streaming services hitting the market and live sports returning, the company missed its own target and that of Wall Street

Netflix Inc on Tuesday posted its weakest subscriber gains in four years as streaming competition increased, COVID-19 pandemic restrictions eased and live sports returned to television. The company added 2.2 million paid subscribers globally during the quarter that ended on Sept. 30, missing Wall Street’s target of 3.4 million and its own forecast. Earnings per share also landed below analyst expectations at US$1.74. The consensus forecast was US$2.14, according to IBES data from Refinitiv. Shares of Netflix, one of the biggest gainers this year as people stayed home amid the pandemic, dropped nearly 6 percent to US$494 in after-hours trading on Tuesday. “Domestic subscribers were nearly flat, which highlights Netflix’s saturation in the US,” said Ross Benes, an analyst with eMarketer. With additions slowing in the US, revenue growth will likely come from price increases, he said. The company reported a blockbuster quarter at the start of the pandemic, adding 15.8 million paying customers from January through March. Netflix had warned investors that a sudden surge in new sign-ups would fade in the latter half of the year as COVID-19 restrictions eased. Netflix forecast that in the fourth quarter, it would bring in 6 million new subscribers worldwide, short of the 6.51 million that analysts expected. The video streaming pioneer is trying to win new customers and fend off competition as viewers embrace online entertainment. During the third quarter, Netflix released Emily in Paris, Enola Holmes and The Devil All the Time. Netflix acknowledged that competition was increasing as studios across Hollywood from Walt Disney Co to AT&T Inc’s WarnerMedia have restructured to compete more directly for video subscribers. “Competition for consumers’ time and engagement remains vibrant,” Netflix said in a letter to shareholders. In the past few months, major sports resumed play and nascent streaming services, including AT&T’s HBO Max and Comcast Corp’s Peacock, offered audiences new options. Netflix said

Nestle increases revenue outlook

Nestle SA’s outlook for revenue growth this year has improved as its big brands thrive, with Purina pet food benefiting amid an increase in pet ownership during the COVID-19 pandemic, the Swiss company said. The world’s largest food and beverage firm forecast organic sales growth of about 3 percent this year, after a 4.9 percent increase in the third quarter, the quickest pace in at least six years. Petcare sales surged 11 percent, leading gains. Pet adoptions and fostering are at a record high, Purina said last month. Nestle got more than 10 billion Swiss francs (US$11 billion) of revenue from petcare products in the first nine months of the year, making it the biggest category after powdered and liquid beverages, which includes coffee. Over the past decade, petcare has been one of Nestle’s fastest-growing products, and this year is set to be the best year for Purina cat and dog chow in years. Nestle previous targeted sales growth of 2 to 3 percent. Revenue climbed 3.5 percent on an organic basis in the nine months through September, beating analysts’ estimates. Purina started selling cat food this year that it says helps reduce allergens, a breakthrough for people who have been told to avoid contact with felines. Allergies to dogs and cats affect as much as 20 percent of the global population, a 2018 study found. Last year, Nestle rolled out a probiotic that it says can help anxious dogs calm down. E-commerce surged 48 percent in the first nine months of the year, making up 12 percent of total sales, helping offset a slump in the food-service sector.

Machines and people to equally split work: WEF

As automation and online work gain ground, organizers of the annual Davos forum are projecting that employers would split work equally between machines and people by 2025, with the COVID-19 pandemic accelerating changes in the labor market. The World Economic Forum (WEF) in a report released yesterday said it expects that a new division of labor between humans and machines would upend and eliminate about 85 million jobs globally across 15 industries. However, it also expects that 97 million new roles would emerge in sectors like artificial intelligence, content creation, and “the care economy” involving children and older people. Two years ago, the forum predicted that more jobs would be created, 133 million, and fewer lost, 75 million. “In essence, the rate of job destruction has gone up and the rate of job creation has gone down,” WEF managing director Saadia Zahidi said. “The good news is that overall, the jobs that are being created still are in greater numbers than the jobs that are being destroyed. But the rate has changed and that’s obviously going to make it difficult for workers to find their next role.” The forum said that jobs involving data entry, accounting and administrative support are set to decline, while it pointed to upsides for “front-line workers” like nurses, and grocery store and care workers who have shown their importance during the COVID-19 crisis. “For those workers, there may be some good news in the future because there will be upward wage pressure and much more recognition of the type of work they do,” Zahidi said. However, sectors like aviation and tourism, which have been “on pause” during the crisis, could come under intense pressure if the pandemic continues, leading to permanent job losses, she said. Meanwhile, automation is taking on a greater importance in the global economy. “When you

Ericsson beats forecasts, posts 14-year-high margin

Ericsson AB reported stronger-than-expected profit as the network equipment vendor gained market share, particularly from rival companies outside of China, amid government restrictions on gear from Huawei Technologies Co (華為). The Stockholm-based company yesterday said that third-quarter adjusted operating profit surged 38 percent to 9 billion kronor (US$1.03 billion), beating the average analyst estimate of 6.44 billion kronor. The adjusted gross margin rose to the highest since 2006, at 43.2 percent, beating an analyst estimate of 39.12 percent. Ericsson gained market share in China and Europe as it and its Finnish rival Nokia Oyj stand to benefit from a push to restrict the use of Huawei gear for the next generation of wireless technology. On Tuesday, this spread to its home country of Sweden, where the government said operators would be blocked from the country’s 5G spectrum auction if they plan to use equipment from Chinese vendors. “While the pandemic has hurt revenues for several of our customers, and in some cases this has led to a reduction of capex [capital expenditure], we have not seen any negative impact on our business, largely due to footprint gains,” Ericsson chief executive officer Borje Ekholm said in a statement. COVID-19 hit sales in Latin America and Africa, though elsewhere they are holding up as operators are continuing to invest in 5G technology and, in some cases, have had to increase capacity amid data traffic surges in some parts of their networks. Ericsson reiterated its targets of 230 billion kronor to 240 billion kronor in sales for this year, with an adjusted operating margin of more than 10 percent and in 2022, 12 to 14 percent. Chief financial officer Carl Mellander said in an interview that a pickup in software sales will likely not be repeated in the fourth quarter. “The strong growth was driven by the networks division

World Business Quick Take

SOUTH KOREA Exports slip slightly Early trade data showed exports this month falling, driven by fewer working days, while daily average shipments continued to recover on resilient tech demand. Exports fell 5.8 percent in the first 20 days of the month from a year earlier, according to Customs Service data released yesterday. The value of average daily shipments still rose 5.9 percent, as the period had 1.5 fewer business days compared with last year. Semiconductor exports increased 12 percent, while overseas shipments of vehicles fell 7.6 percent and oil products decreased 42 percent. Sales of computer devices rose 11 percent. MALAYSIA Price drop continues The consumer price index fell for the seventh straight month last month, declining 1.4 percent from a year earlier, government data showed yesterday. The drop was more than the 1.3 percent decline forecast by 10 economists in a Reuters poll. In August, the index fell 1.4 percent. Last month’s decline was driven largely by the transport sector index falling 9.9 percent year-on-year, and lower housing, water, electricity, gas and other fuel prices, the Statistics Department said in a statement. Meanwhile, the government would exempt as much as 10 percent of workers in Kuala Lumpur, Selangor, Sabah, Labuan and Putrajaya from its work-from-home order, Trade Minister Mohamed Azmin Ali said in a statement yesterday. UNITED KINGDOM Debt highest since 1960 Government borrowing in the first half of the year was more than six times higher than before the COVID-19 pandemic, official figures showed yesterday, taking public debt to its highest since 1960. Public borrowing last month totaled ￡36.101 billion (US$47.16 billion), above all forecasts in a Reuters poll of economists, although August’s figure was revised down by more than ￡5 billion to ￡30.113 billion. The increased borrowing took total public debt further above the ￡2 trillion mark to ￡2.060 trillion, or 103.5 percent of GDP,

CIER raises growth forecast to 1.76%

V-SHAPED RECOVERY: Local tech firms have benefited from strong demand for 5G deployment and electronic devices required for a low-contact economy, CIER said

The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its forecast for the nation’s GDP growth this year to 1.76 percent, from its previous estimate of 1.33 percent, saying exports and private consumption have staged a V-shaped recovery from the COVID-19 pandemic in the second half of the year. “The upgrade aims to reflect the fast recovery in Taiwan’s exports and domestic demand,” CIER president Chang Chuang-chang (張傳章) told a media briefing. The Taipei-based think tank said the economy might have expanded 2.77 percent last quarter — emerging from a 0.78 percent decline in the second quarter — and would grow 2.55 percent this quarter. The showing is impressive, making Taiwan one of the few economies reporting growth as COVID-19 infections surge in many parts of the world, threatening economic activity, the institute said. Local technology firms have benefited from strong demand for 5G deployment and electronic devices required for a low-contact economy as well as rush orders and order transfers amid US-China tensions, CIER said. China’s Huawei Technologies Co (華為) avidly stockpiled electronics inventory ahead of the Sept. 15 sales ban imposed by Washington due to national security concerns. Outbound shipments might have increased 3.86 percent last quarter and would likely gain 2.59 percent in the current quarter from their year-ago levels, CIER said. Imports would be soft for the whole of this year, due to lower fuel and raw material prices, allowing net external demand to contribute 0.82 percentage points to GDP growth this year, it said. Domestically, private investment is likely to rise 2.55 percent from last year, aided by companies returning from China, and efforts by local tech firms to expand and maintain technology leadership, CIER said. The government and public enterprises would lend support by raising their investments by 10.88 percent and 26.39 percent year-on-year respectively, it said. Active investments would offset weak private

By Crystal Hsu

HSBC Taiwan approves sustainability-linked loans

HSBC Bank (Taiwan) Ltd (匯豐台灣商銀) has approved two sustainability-linked loans totaling NT$450 million (US$15.55 million) for Taya Group (大亞集團) and Sinbon Electronics Co (信邦電子), the bank said yesterday, adding that interest rates would fall if the borrowers’ sustainability performance improves. Those marked the first sustainability-linked loans granted by HSBC Taiwan, it said. While HSBC Taiwan has experience providing green loans for the nation’s developers of renewable energy sources to support their projects, the bank began focusing on sustainability-linked loans to meet rising demand from companies in other sectors planning to undertake sustainability programs, it said. “As we reward our clients who reach their goals of sustainability development with special incentives, such as lower interest rates, many clients are more interested in taking out sustainability loans instead of regular corporate loans,” commercial banking head Stanley Hsiao (蕭仲程) told the Taipei Times by telephone. HSBC Taiwan discusses their targets with the borrowers before approval, and assigns independent institutions to review and check if the borrowers meet their targets the following year, the bank said. Taya Group, an electrical wire and cable provider that is expanding into the green energy sector, aims to use the loans to increase its solar power generation and reduce greenhouse emissions annually, and build a photovoltaic power plant in Tainan, the bank said. Given that Taya would sell electricity to state-run Taiwan Power Co (台電), the bank would review the utility’s documents to confirm that Taya’s power generation rises next year, it said. Sinbon, which produces cables, connectors and modems, aims to deepen its operations in the green energy sector by providing more key components to solar and wind power developers, and electric-vehicle companies, it said. HSBC Taiwan said it would reduce the interest rate on Sinbon’s loan if the revenue generated from the sale of green energy-related products account for a greater share of the

By Kao Shih-ching

Life insurers see FYPs fall for ninth month in a row

Life insurance companies’ combined first-year premiums (FYP) fell for the ninth consecutive month last month due to a low interest rate environment and tougher regulations, a report released on Monday by the Life Insurance Association showed. Total FYP plunged 10 percent year-on-year to NT$54.42 billion (US$1.88 billion), including NT$32.1 billion in FYP generated by traditional life insurance products and NT$22.2 billion derived from investment-linked policies, the report showed. Last month’s fall was milder than the declines of 30 to 40 percent reported earlier this year, indicating stabilizing sales, the report said. Investment-linked policies’ FYP rose 33 percent annually last month, as insurers launched new products to meet consumer demand for products that offer better returns than bank deposits, it said. For the first nine months, cumulative FYP generated by investment-type policies totaled NT$137 billion, down 28 percent year-on-year, while traditional policies fell 30 percent to NT$467 billion. Consumers were less interested in traditional life insurance policies after insurers stopped offering products with much higher returns to comply with a new regulation that took effect in July. However, health insurance policies bucked the trend with a 12 percent rise in cumulative FYP to NT$32 billion during the January-to-September period, as people became more concerned about their health insurance coverage amid the COVID-19 pandemic, it said.

By Kao Shih-ching

Gou ties Wisconsin project to aid

Hon Hai Precision Industry Co (鴻海精密) founder Terry Gou (郭台銘) yesterday said that the company remains committed to its project in Wisconsin, but appeared to condition its completion on the receipt of state incentives, the Wall Street Journal reported. Gou said in a statement that Hon Hai, known as Foxconn Technology Group (富士康科技集團) outside of Taiwan, remains committed to its investment, although “market conditions and the COVID-19 pandemic” have altered the timing of its expansion and the specifics of its manufacturing plans. The company has over the past three years invested US$750 million to transform southeastern Wisconsin into a high-tech hub, the statement said. However, the Journal said Gou’s comments were the “most explicit yet that the project could be scaled back and might not be completed if state officials don’t come through with promised aid.” “Foxconn will work as a partner with those who treat the company as a partner,” Gou said in the statement. “Foxconn will remain committed to the completion and expansion of our project and investment in Wisconsin as long as policymakers at the federal, state and local levels remain committed to Foxconn.” Gou’s statement followed a string of setbacks and negative news reports about the project, which Foxconn negotiated with US President Donald Trump and Wisconsin Republican Party officials in 2017. The Verge Web site on Monday published a lengthy critique of the company’s failure to deliver on plans to build a massive LCD factory and create 13,000 jobs, saying that it had left “empty promises and empty buildings” where Trump had vowed would be “the eighth wonder of the world.” Wisconsin officials last week informed the company that it had not hired enough employees last year to qualify for state tax credits. The Wisconsin Economic Development Corp said the company’s plans for the project

Credit ratings of FPG’s four main units reduced

Taiwan Ratings Corp (中華信評) has lowered the credit ratings of Formosa Plastics Group’s (FPG,台塑集團) four major units by one notch over concerns that a global economic slowdown and volatility in oil prices would weigh on demand and profit recovery next year and beyond. The downgrade came after the local arm of Standard & Poor’s Global Ratings (S&P) said it believed the operating environment would remain tough ahead due to the COVID-19 pandemic. “We have lowered the long-term issuer credit ratings on the four core members of the group from ‘twAA’ to ‘twAA-,’” Taiwan Ratings said, referring to Formosa Plastics Corp (台灣塑膠), Nan Ya Plastics Corp (南亞塑膠), Formosa Chemicals & Fibre Corp (台灣化纖), and Formosa Petrochemical Corp (台塑石化). Weak operating cash flows and high capital expenditures could keep their financial strength below earlier assumed levels for a prolonged period, despite a gradual recovery from the virus shock, the agency said, giving them a stable outlook. The pandemic would seriously hurt the oil and chemical markets for the coming several quarters, dragging the recovery in the group’s debt ratio to earnings before interest, taxes, depreciation and amortization (EBITDA) next year and in 2022, it said. The group’s revenue might decline by 25 to 30 percent, with the EBITDA margin shrinking to 10 to 11 percent this year, from 12.5 percent last year, Taiwan Ratings said. Sales at the four units slumped 10 to 35 percent in the first half of this year, with three of them reporting losses, the agency said. The group’s sales might recover by 20 to 25 percent next year, supported by an expected rebound in oil prices and the group’s capacity additions in the US and China, it said. However, the group’s EBITDA margin would widen by only 12 to 14 percent next year, as tepid demand and capacity additions would limit the expansion of its

By Crystal Hsu

Cathay Pacific to cut 6,000 jobs, close Dragon brand

‘NEW TRAVEL MARKET’: The carrier initially planned to lay off about 8,000 people globally, but after government intervention reduced that to 18 percent of its workforce

Cathay Pacific Airways Ltd (國泰航空) would cut 6,000 jobs and close its Cathay Dragon brand, the South China Morning Post reported, as part of a strategic review to combat the unprecedented damage caused by the COVID-19 pandemic. The Hong Kong-based airline is expected to officially announce the plan after the market close today, the newspaper said. It initially planned about 8,000 layoffs globally, but after government intervention reduced that to 18 percent of its total workforce, including about 5,000 jobs in Hong Kong, it said. The company, which posted a HK$9.9 billion (US$1.3 billion) loss in the first half, has for months been working on the review that management presented to the board on Monday. Cathay last month said that it would not survive unless it adapted its airlines for the “new travel market.” Cathay’s passenger traffic slumped as travel restrictions escalated and people refrained from flying, with numbers as low as 500 a day in April and May. On Monday, the company said it expected to operate at about 10 percent of pre-pandemic capacity for the rest of the year and well below one-quarter in the first half of next year. For last month, passenger numbers were down 98.1 percent from a year earlier. Cathay carried out a HK$39 billion recapitalization plan that was completed in August and left the Hong Kong government with a 6.08 percent stake in the company and two observer seats on its board. In another effort to cushion the blow from the loss of passengers, the airline has been renegotiating aircraft deliveries from Airbus SE and Boeing Co. Cathay already introduced an unpaid leave program for staff earlier in the year as monthly losses climbed to as much as HK$3 billion, and trimmed salaries and closed crew bases overseas. The company was struggling with losses before the pandemic as