Higher tariffs would negatively affect overall end-demand and investor sentiment around the world and would have a mixed impact on Taiwanese manufacturers, analysts said last week as additional tariffs yesterday came into effect in the US-China trade dispute.
Washington’s latest 15 percent tariff imposed on Chinese imports includes apparel and footwear, so the effect on Taiwanese manufacturers would be limited, as most of their capacity has been shifted to ASEAN, including Vietnam and Cambodia, Yuanta Securities Investment Consulting Co (元大投顧) analysts led by Wang Deng-cheng (王登城) said in a report last week.
“Eclat Textile Co (儒鴻) has no exposure in China, while Feng Tay Enterprises Co (豐泰) and Makalot Industrial Co (聚陽) have 9 percent and 5 percent of capacity in China [respectively], mainly for China’s domestic market and Japan,” the analysts said.
“In addition, Taiwan Paiho Ltd (台灣百和) is a sub-material supplier mostly exporting its products to textile and shoe brands,” the analysts said. “As such, it indicated minor impact and the chance for transferred orders for the above names.”
However, Yuanta is neutral on Pou Chen Corp (寶成), because the footwear maker still has 13 percent of capacity in China and its sales in the US constitute up to 10 percent of its overall sales, the report said.
If Pou Chen decides to relocate its shoe production lines to ASEAN, it would likely affect its margin performance, the report said.
The US started collecting the 15 percent tariffs on some Chinese goods yesterday, including on foodstuffs, sports equipment and musical instruments, as well as some technology products like the Apple Watch, according to the official list compiled by the US Trade Representative’s office.
In response, China started additional tariffs of 5 percent to 10 percent on 1,717 US products, including crude oil for the first time.
Washington on Oct. 1 is to increase tariffs on US$250 billion of Chinese goods to 30 percent from 25 percent and add items — including smartphones, notebook computers, toys and some clothing — to the 15 percent list on Dec. 15.
The analysts said they were cautious over smartphone supply chains, as well as consumer electronics and computers that Taiwanese companies produce in China.
“We see a long-term negative impact on the smartphone supply chain, as it is facing more difficulties in moving production outside of China due to the labor-intensive nature of smartphone production,” they said in the report.
“For notebooks, less than 10 percent of capacity is located outside of China,” they said.
“We note that Inventec Corp (英業達) and Compal Electronics Inc (仁寶) have started moving capacity from China to Taiwan or Southeast Asian countries like Vietnam, while the two companies estimate relocation for notebooks will take at least one or two more quarters, meaning notebooks shipped to the US will likely suffer as a result of the 15 percent tariffs to be imposed from Dec. 15,” they said.
However, the report said that increased US tariffs would have a limited effect on the server and networking sectors, because most companies completed capacity relocation in the first half of the year.
It also said that the tariff increase is unlikely to have any direct impact on Taiwan’s semiconductor industry, although there might be some indirect effects due to a global end-demand slowdown resulting from rising trade tensions.
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