Low demand hampers VIA

VIA Technologies Inc (威盛電子) says profit is shrinking faster than expected as overseas computer orders drop. Taiwan's economy is probably doing the same.

"PC demand isn't as strong as we predicted," Miller Chen, Via's director of finance and accounting, said yesterday. The world's second-largest maker of the chipsets that control computer functions earlier cut its earnings forecast for the year by 40 percent after third-quarter profit fell almost two-thirds.

Sales at VIA and other electronics makers are drying up as customers from Hewlett-Packard Co to Compaq Computer Corp slash orders. That's sapping economic growth in Taiwan, which makes about a quarter of the world's desktop computers and half its notebook computers.

Gross domestic product probably shrank 4.4 percent in the third quarter from a year earlier, according to the median forecast of 12 economists surveyed. That would be the biggest drop since records began in 1951 and the second in a row. The government will report third-quarter GDP today at 5pm.

"Things are going down the tubes at a rapid pace," said Jonathan Anderson, executive director of Asian economic research at Goldman Sachs Group Inc. in Hong Kong. "Taiwan is completely leveraged to the world economy. There is nothing to do but wait for US and Japan technology demand to pick up."

That may not happen for another year, Anderson said. The US economy, which absorbs about a fifth of Taiwan's exports, shrank at a 0.4 percent annual pace in the third quarter and probably fell into recession this quarter as the Sept. 11 terrorist attacks crimped spending and investment.

The economy will probably extend its slide next quarter, contracting 4.3 percent, according to the Bloomberg survey.

Economists expect a 2.6 percent contraction for the full year.

Taiwan's exports, which make up about half of GDP, tumbled 29 percent in the third quarter from a year earlier and have fallen for eight months. Overseas orders for Taiwan-made goods, an indicator of shipments about two months later, fell 27 percent in September, suggesting sales won't pick up soon.

Falling sales are forcing factories to slash production, shed workers and shut plants. Industrial production fell about 9 percent last quarter from a year earlier, and unemployment climbed to 5 percent in September, the ninth straight record.