Taiwan’s tycoons are reining in 20 years of expansion in China to invest at home, pressuring the central bank to stem gains in the New Taiwan dollar as strategists see it rising more than the yuan for the first time since 2007.
In the five months since President Ma Ying-jeou (馬英九) cut taxes and increased foreign-labor quotas to lure investment, 26 companies from Largan Precision Co (大立光) to Kenda Rubber Industrial Co (建大輪胎) filed proposals to put US$5.9 billion to work locally, more than triple the amount for 2011, the Ministry of Economic Affairs said.
The government envisages its programs will create 26,000 jobs.
“We’ve been talking about Taiwan’s industries hollowing out for 20 years, but this is starting to change,” Frances Cheung (張淑嫻), a senior strategist at Credit Agricole CIB in Hong Kong, said in an interview on Friday last week. “Returning money will help boost the Taiwan dollar.”
While Taiwan’s central bank intervenes to curb any advance, the capital flows may bolster the NT dollar, which is forecast to appreciate more than the yuan after trailing for five years, surveys of analysts by Bloomberg show.
After strengthening about 20 percent from its low in 2009 through last year, the NT dollar has depreciated 2.2 percent this year, Asia’s third-worst performer after the yen and the South Korean won.
Kenda, the world’s third-largest maker of bicycle tires, and Largan, a supplier of camera lenses to Microsoft Corp and Apple Inc, are planning to build more plants in Taiwan after contributing to at least US$125 billion of investment by Taiwanese companies in China since 1991.
Corporate outflows to China fell 17 percent to US$10.9 billion last year, according to the Investment Commission.
Taiwanese firms may invest US$8 billion in the country this year, Barclays PLC estimates.
“It’s a major trend reversal,” Leong Wai Ho (梁偉豪), a senior regional economist at Barclays in Singapore, said in an interview on Tuesday last week. “This infusion of investment may reduce the drag on the financial account.”
Investment outflows from Taiwan led to a financial account deficit in seven of the past 10 years. The shortfall increased to US$11.6 billion in the fourth quarter, the most since the same period of 2011, official data show.
The NT dollar, which is down 0.7 percent in the past year to NT$29.801 on Tuesday, is expected to strengthen 2.8 percent against the US dollar to NT$29 by the end of this year, according to the median estimate of 25 analysts in a Bloomberg survey.
The yuan, which has advanced 1.5 percent to 6.2128 in Shanghai, is forecast to rise 1.5 percent to 6.12, a survey of 36 analysts shows.
While currency appreciation could help temper inflation, the central bank is capping gains in the NT dollar to protect exporters.
“Taiwan’s authorities are quite heavily intervening, therefore I don’t see the Taiwan dollar moving that much,” Tadashi Tsukaguchi, chief fund manager of the global macro hedge fund at Mizuho Securities Co in Tokyo, said in an interview on Wednesday last week.
Ma’s incentives to lure companies back to Taiwan should help boost economic growth by 0.1 percentage point this year, Leong said.
The government predicts GDP would increase 3.59 percent this year, up from 1.26 percent last year, while private investment by local companies would reach a record NT$2.3 trillion.
“We used to say that when Taiwanese companies get export orders, it creates jobs in China,” Leong said. “This will now start to change.”
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to