Taiwan's Machine Tool Export Estimated to Drop 16% YoY in 2013

Chairman of the Taiwan Association of Machinery Industry (TAMI), H.T. Hsu, recently estimated the island's machine-tool exports at US$3.5 billion for 2013, down 16% year on year to 2007's level. Hsu attributed the drop mostly to declining demand in China, strengthening competitiveness of Japanese manufacturers on the steeply devalued yen, and the effect of free trade agreement between South Korea and Europe and the United States.

Despite the Taiwan industry's exports projected to grow in 2014 thanks to recovering demand in the United States and Europe, Hsu feels the growth rate will narrow down to 3%, instead of the projected 7-8% based on passage of the Cross-Strait Service Trade Agreement. The export value will stand at US$3.6 billion if the growth rate falls within his expectation, falling short of US$4 billion the Taiwan industry hopes for.

The chairman now hopes that the Economic Cooperation Framework Agreement (ECFA) follow-up talks on commodity trades between Taiwan and  China would reach agreement in June 2014 and the NT dollar exchange rate could be more market driven, lest the outlook for the island's machine tool industry should remain bleak in 2014. The said talks will address lowering or eliminating tariffs on trading of some types of machine tool between Taiwan and the mainland.

Taiwan's machine-tool makers hope the upcoming talks will exempt another 700 types of machine tools from duty as have the 116 types when ECFA was signed in 2010.

According to the association, the island's machine-tool export bottomed in 2009 after the 2008 global economic meltdown with revenue of US$1.7 billion, which rose to US$2.9 billion in 2010, US$4 billion in 2011, and the record high of US$4.2 billion in 2012.

Taiwan's machinery industry as a whole is projected to generate revenue of NT$950 billion (US$31 billion) in 2013, down  2.1% year on year, with  exports estimated to drop 3% year on year to US$19.5 billion in 2013 but increase 5% in 2014.

Steep devaluation of the Japanese yen in recent months have impacted Taiwan's machine-tool exports, eroding its exports to Thailand by 16.4%, to Indonesia by 11.5%,  to Malaysia by 19.3%, to India by 25.9%, and Vietnam by 5.5% year on year in the first 11 months of 2013.

Eric Chuo, chairman of the Taiwan Machine Tool & Accessory Builders' Association (TMBA), estimated the island's machine-tool industry to begin bottoming out in the second quarter 2014.

Production and Export of Taiwan's Machine Tool Industry (2007-2013)

Year	Production Value	Export Revenue	YoY Change(%)
2007	US$4.5bn	US$3.5bn	16.7
2008	US$4.7bn	US$3.7bn	5.9
2009	US$2.2bn	US$1.7bn	-53.1
2010	US$3.9bn	US$2.9bn	69.8
2011	US$5.0bn	US$4.0bn	35.1
2012	US$5.3bn	US$4.2bn	5.9
2013 (e)	---	US$3.5bn (e)	-16.6

Source: TAMI

Note: 2013 figures are estimates.