The climate gauge for the manufacturing industry was “blue” again last month, weighed by declining petrochemical prices, and lower export orders and exports, but the semiconductor industry showed signs of recovery, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
The manufacturing business index compiled by the Taipei-based think tank was 9.86, rising mildly for the third consecutive month, but still remaining below the threshold of 10.5, suggesting a recession.
Scores lower than 13 indicate a recessionary state, those between 13 and 16 indicate stability, while larger values signify growth.
Of the five constituents, the readings on operating conditions and costs rose fractionally from the previous month, while pricing and demand measures fell, TIER said in a report, adding that raw material prices held steady.
Businesses generally remained conservative amid a US-China trade dispute, which has taken a toll on the global economy, including Taiwan, the report said.
The recessionary state is likely to persist for the rest of this year with only a slim chance of a turnaround, as falling prices reflect weak demand and would keep non-technology sectors mired in a slowdown, with the exception of textile suppliers, the report said.
Local textile makers have shifted to automation to stay competitive and are relatively upbeat about the business outlook, it said.
Electronics suppliers might display a mixed performance, as stronger-than-expected sales of new iPhones and demand for 5G infrastructure benefit companies in the respective supply chains, TIER said.
However, other products, such as flat panels and LED displays, would continue to suffer from oversupply and sharpening competition from China, it said.
Against that backdrop, the climate gauge for electronics firms could turn “yellow-blue” this quarter and for the entire year, suggesting a sluggish state, TIER said.
The manufacturing business index gauge is likely to improve to “yellow-blue” next year, led by the semiconductor sector, which would remain in “green” mode, suggesting stability, it said.
International research firms have forecast that demand for semiconductors would bottom out this quarter and stage a recovery next year, TIER said.
Autonomous vehicles, 5G and Internet of Things applications would serve as catalysts, it said.
Sales of electric vehicles are expected to rise, supported by government subsidies, TIER said, and although imported vehicles are more competitive, the US-China trade dispute poses potential headwinds.
TIER assigned a “yellow-blue” rating for related companies for next year, the same as this year.
Vehicle sales dropped 1.1 percent in the first 10 months of this year, with the market share of locally made vehicles falling below 50 percent.
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