Mon, Jul 15, 2013 - Page 14 News List

Companies express NT dollar fears

SALES SQUEEZED:The depreciation of the yen has impacted the export value of Taiwanese machine tool makers, according to Jerry Su, a Credit Suisse analyst

By Kevin Chen  /  Staff reporter

Taiwan’s machinery industry has urged the central bank to keep the value of the New Taiwan dollar low enough to allow it to compete with regional rivals, as Japanese firms gain new orders due the depreciation of the yen.

Some firms, including Hiwin Technologies Corp (上銀科技) have cut prices to try to stay competitive, but analysts warn this could raise margin pressures and will not help long-term prospects.

“The depreciation of the Japanese yen has impacted the export value” of Taiwanese machine tool makers, Jerry Su (蘇厚合), an analyst at Credit Suisse’s Taipei securities branch, said in a note on Friday, citing Taiwanese customs data. “However, we believe the mindset of the machinery industry determines its compositeness, not just the foreign exchange rate.”

“The industry needs to focus more on catching up with the quality of its Japanese peers’ products, rather than just pricing products 20 percent to 30 percent lower,” he added.

As of Friday, the value of the New Taiwan dollar had declined nearly 2.58 percent since the beginning of the year against the US dollar, compared with a 5.15 percent fall for South Korea’s won and a 12.39 percent decline for the yen, while the Chinese yuan had risen 1.46 percent over the same period, according to the central bank’s data.

Countering calls for devaluation of the NT dollar, the central bank said last month that Taiwan’s machine tool exports to China fell 19.1 percent year-on-year in the first four months of the year, less than the 40.8 percent fall in Japanese exports to China in the same period.

China accounts for 26.5 percent of Japanese exporters’ total revenue, while the figure is 33.3 percent for their Taiwanese counterparts, according to the bank.

“This shows that the depreciation of the yen did not help Japanese machinery manufacturers to gain more orders in China than their Taiwanese rivals,” the bank said in a report on June 27.

Nevertheless, Hiwin, a maker of linear guideways, ball screws and industrial robots, has cut prices to counter the yen’s depreciation and fend off competition from Japan’s THK Co in particular. This has raised concerns from Daiwa analyst Christine Wang (王琦清).

“We expect Hiwin’s sales to be lower than other players’, as increased competition from THK should lead to continued price erosion,” Wang said in a note on Wednesday last week.

The company said last month’s sales of NT$1.06 billion (US$35.4 million) exceeded the NT$1 billion mark for the first time since the fourth quarter of last year and represented the highest level since November 2011, when Hiwin reported record sales of NT$1.37 billion.

Consolidated revenue in the April-to-June quarter rose 18 percent to NT$2.8 billion from the previous quarter, but accumulated sales in the first half of the year fell 18.35 percent year-on-year to NT$5.18 billion, company data showed.

Hiwin chairman and CEO Eric Chou (卓永財) told that he expected a better sales outlook for the second half, driven by a recovery in demand from the electronics and automobile sectors plus a trend for industrial automation.

Still, Taiwan’s machinery exports are on a downward trend, according to Credit Suisse and Daiwa analysts.

Recent checks with Taiwanese machine tools and general machinery makers showed that the industry’s visibility on orders remains short in an uncertain environment, especially with recent credit tightening in China,they said.

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