Taiwan's Export Orders Dip to 22-Month Low in May

Taiwan's export orders hit a 22-month low of US$35.79 billion in May, contracting 5.9 percent from the same month of last year, according to the Ministry of Economic Affairs (MOEA), whose senior officials of the Department of Statistics blame mostly reduced orders from mainland China and Hong Kong for the unexpected decline.

The department's statistics show Taiwan's orders from the mainland and Hong Kong decreased by a combined US$1.18 billion year on year in May, accounting for a half of the reduction of US$2.22 billion of orders from overseas.

The department's senior officials say the cause of the plunge in orders from mainland China and Hong Kong being lukewarm growth in the global economy and steadily expanding domestic supply chains in the mainland.

They say the sagging global economy kept the mainland's export growth rate to only 0.7 percent year on year in the first five months of this year, thereby impacting the mainland's demand for capital equipment by around 20 percent from overseas suppliers, including Taiwan, whose role as supplier to China continues to be undermined by the mainland's continual development of its domestic supply chains.

The May order slump caught off guard MOEA's original expectation that the mainland's homegrown supply chains would at most affect Taiwan's liquid crystal display (LCD) industry. Instead the May results show the mainland's homegrown supply chains had taken toll not just on Taiwan's LCD industry but also its IC design, IC assembly and DRAM sectors.

The statistic department's officials say the orders from Hong Kong and mainland China for Taiwan's electronic products had dwindled for the fourth month in May after Beijing announced last year to develop the nation's homegrown semiconductor industry with a dedicated fund of RMB100 billion (US$16.39 billion).

C.M. Kuang, a former Minister of the National Development Council (NDC) of the Taiwan Cabinet, foresees the mainland's IC supply chains to even threaten Taiwan's silicon foundry sector over the next three to five years in consideration of Beijing's resolve to develop its own integrated supply chains.

According to MOEA's statistic department, in May Taiwan's precision-instrument, base-metal, machinery, plastic-product, and chemical-product industries all posted double-digit drops in export orders, contrasting the island's information-communication technology sector registering a slight growth.