Export orders used to be a key leading indicator for Taiwan’s exports and economy. The rules have changed, as export orders and actual exports have diverged in recent months. A closer look at these two key economic indicators is needed to acquire a holistic view of the nation’s economy, given that local manufacturers have allocated some overseas production back home.
Export orders again drifted into a negative territory in December, dropping 16 percent year-on-year to US$43.81 billion, after a brief upturn in November. The Ministry of Economic Affairs expects the downtrend to continue in the first half of this year. Meanwhile, exports expanded for a second straight month in December, increasing 11.6 percent annually to US$39.94 billion. The Ministry of Finance said it expected last month’s exports to make further gains.
Export orders include orders received by local manufacturers’ local headquarters and overseas operations, while exports only count outbound shipments based on orders received by manufacturers’ local operations. Therefore, slowing export orders indicate that outbound demand, especially from China, has been sluggish. In December, about 48.6 percent of products ordered were produced in overseas factories, primarily in China, down 4.4 percentage points from a year earlier, as local manufacturers allocated some overseas production back home, especially in the information and communication technologies (ICT) sector, the Ministry of Economic Affairs said.
Quanta Computer Inc and a number local manufacturers have moved production of high-end servers — including artificial intelligence (AI) servers and other high-end products — back to Taiwan over the past few years, it said.
Last year as a whole, ICT exports surged 29 percent year-on-year to US$83.36 billion as a result of demand related to AI devices. It was a new record, finance ministry data showed. Exports to the US and Europe also climbed to record highs. However, China, including Hong Kong, last year witnessed its worst slump on record mainly because of a decrease in demand for electronic components.
A rebound in ICT demand has helped fuel Taiwan’s exports, but the growth has not been enough to offset sluggish global demand. Yet it does bode well for the ICT-reliant economy, as it means that supply chain inventory is slimming down and the inventory correction cycle might be nearing its end, signaling a marked rebound in the next few months.
If China’s Lunar New Year shopping season goes well, local ICT manufacturers can expect a better rebound. Disappointing economic conditions in China have been a key drag on Taiwan’s export orders, the ministry said.
Chipmakers Taiwan Semiconductor Manufacturing Co and United Microelectronics Corp have said their customers are significantly reducing their inventory, but are wary of placing big orders as they prefer to be extremely cautious about inventory control.
The ministries and most Taiwanese electronics companies are pinning their hope on AI to drive growth in the third and fourth quarters, as long as no black swan events occur. Emerging demand for AI technology is considered an important new growth engine for export orders and exports alike.
To The Honorable Legislative Speaker Han Kuo-yu (韓國瑜): We would like to extend our sincerest regards to you for representing Taiwan at the inauguration of US President Donald Trump on Monday. The Taiwanese-American community was delighted to see that Taiwan’s Legislative Yuan speaker not only received an invitation to attend the event, but successfully made the trip to the US. We sincerely hope that you took this rare opportunity to share Taiwan’s achievements in freedom, democracy and economic development with delegations from other countries. In recent years, Taiwan’s economic growth and world-leading technology industry have been a source of pride for Taiwanese-Americans.
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To our readers: Due to the Lunar New Year holiday, from Sunday, Jan. 26, through Sunday, Feb. 2, the Taipei Times will have a reduced format without our regular editorials and opinion pieces. From Tuesday to Saturday the paper will not be delivered to subscribers, but will be available for purchase at convenience stores. Subscribers will receive the editions they missed once normal distribution resumes on Sunday, Feb. 2. The paper returns to its usual format on Monday, Feb. 3, when our regular editorials and opinion pieces will also be resumed.
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