Taiwan’s technology sector, in particular the semiconductor industry, is expected to remain a key driver of its economic growth next year, DBS Bank Ltd said in a report last week.
However, tech companies would still be pressured to shift sensitive production out of China and further diversify their supply chains as the US-China technology dispute takes root, the bank said.
Strong technology exports boosted the nation’s GDP, which expanded by a better-than-expected 3.92 percent year-on-year last quarter, the most since the second quarter of 2015. That prompted the Directorate-General of Budget, Accounting and Statistics (DGBAS) on Nov. 27 to adjust upward its full-year growth forecast to 2.54 percent from 1.56 percent.
Photo: CNA
The DGBAS predicted exports might remain strong this quarter and grow 7.75 percent year-on-year on the back of strong demand for new technology applications, but DBS said that global demand for computers and consumer electronics is expected to decline next year, as “the one-off purchases related to remote work and distance learning” driven by the COVID-19 pandemic dissipate.
However, demand for cloud services, data centers and 5G applications would likely continue to increase next year, as many countries build digital infrastructure and push digital transformation after the pandemic, DBS said.
In addition, smartphone demand is poised to recover next year as global income conditions improve and more consumers upgrade their smartphones as 5G networks expand, it said.
“Overall, the outlook for semiconductor demand remains constructive,” DBS economist Ma Tieying (馬鐵英) said in the report.
Taiwan has managed to maintain positive GDP growth this year despite the pandemic, which DBS forecast would expand 1.8 percent this year and 4.2 percent next year, citing the government’s early and effective response to the outbreak, as well as the tech sector’s strong performance.
Given the mild inflation outlook and the strong New Taiwan dollar, the central bank is expected to hold its policy interest rate steady at 1.125 percent through next year, as pressure to normalize rates would remain low in the near term, DBS said.
However, the potential impact of the US’ transition in leadership is worth watching, and there could be some tactical adjustments in US-China trade issues as multilateralism regains US support under US president-elect Joe Biden’s administration, the bank said.
Even though US-China trade tensions might improve under Biden’s presidency, the two countries’ tech sector rivalry would continue next year, DBS said, citing bipartisan concerns in the US about national security risks resulting from China’s advances in 5G, artificial intelligence and other new technologies.
Moreover, the COVID-19 has also caused companies to weigh the risks of geopolitical tensions among countries and diversify their supply chains, with some firms shifting their manufacturing base out of China to other Asian countries such as India, Vietnam and Thailand.
“To Taiwan, the trade disruption risk as a result of [the] China-US trade war may decrease in 2021. But pressure would remain for the Taiwanese tech companies to diversify their supply chains to hedge the risk of China-US tech tensions,” Ma said.
“In addition, [the] leadership transition in the US creates some uncertainties for the outlook of a bilateral free-trade agreement (FTA) between Taiwan and the US. The focus of Taiwan’s FTA talks may shift towards multilateral agreements like the CPTPP [Comprehensive and Progressive Agreement for Trans-Pacific Partnership] going forward,” she added.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his