Taiwan’s export orders showed an uneven recovery in traditional sectors struggling to emerge from a slump during the first three quarters of this year, given their greater exposure to the Chinese market. Some experts might urge the government to pursue free-trade pacts to help local businesses gain easy access to new markets. However, industries should prioritize enhancing their technological capabilities over time-consuming trade talks, which are rife with uncertainties.
The nation’s machine tools, steel coils, plastic and rubber products sectors took a hit from China’s economic slowdown and overproduction. Orders have been rising and falling over the past nine months without showing any signs of a major pickup, and that stagnation could persist, the Ministry of Economic Affairs said. Orders for plastic and rubber products fell 1.1 percent annually last month, while demand for chemical products dropped 8.5 percent. Mechanical equipment orders rose 3.6, but declines in machine tools reduced that growth, holding monthly orders at about US$1.6 billion over the past nine months. Similarly, basic metals orders, mainly steel products, rose 4.3 percent year-on-year last month, but did not show marked progress.
Weakness in traditional sectors have increasingly become a drag on the nation’s overall export performance. The economy should not be entirely reliant on electronic components such as semiconductors, and electronics such as servers and PCs. The sectors expanded 10.5 percent and 7 percent annually last month respectively, with a majority of the goods shipped to the US.
Diversifying export destinations should be obvious, but the question is how to make inroads into new markets, as most machine tool makers or chemical producers are relatively small and are technology followers. Signing more free-trade agreements that lower tariffs would offer an easier way to access new markets. However, signing such pacts or acceding to an economic trade zone is complicated by political factors and as more industries would be encompassed in the talks. For example, the government has been striving to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership since 2021, but Taiwan’s prospects to join the pact remain dim so far.
Aside from such uncontrollable factors, companies should concentrate on risk management including how to upgrade their products and technologies to minimize external effects on their business outlook. It is essential for companies from traditional sectors to develop innovative thinking to ride out tough times.
Syntec Technology Co stands out amid the machine tool sector’s slowdown. It specializes in making computer numerical control products, which can be used in a wide range of manufacturing equipment and servo motors, which are crucial for factory automation. The company commands about a 20 percent market share in China, closely behind Japan’s Fanuc Corp. The 29-year-old Hsinchu-based company’s revenue surged 42 percent annually during the first nine months of this year to about NT$8.14 billion (US$253.57 million). Its share price on the Emerging Stock Market more than doubled in four months from its NT$153 listing price on June 18.
Syntec attributed its success to its continuous investment in technologies and agile operation. The company plans to invest 11 percent of its total revenue this year on research-and-development efforts, significantly higher than the 7.6 percent average spent last year by local manufacturers listed on local stock markets. Syntec sets an encouraging example for the industry, showing that even traditional businesses can learn new tricks and outshine their peers. Free-trade pacts can provide an extra benefit, if there is any.
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