Industries chafe at rise in NT dollar

SUDDEN IMPACT: The NT dollar closed at NT$32.554 against the greenback on the Taipei foreign exchange market on Friday -- the highest level in almost four years


Mon, Nov 22, 2004 - Page 10

The surging New Taiwan dollar against the US dollar may prevent the nation's export-oriented laptop computer makers from meeting their monthly targets, an industry observer said yesterday.

"Notebook makers' sales for November are expected to see less-than-expected growth brought on by the rapidly appreciating NT dollar," Daphne Cheng (程守善), an analyst at Nomura Securities Co in Taipei, said in a phone interview.

The local currency has risen by about 3 percent versus its US counterpart so far this month, and such appreciation may eat into laptop makers' revenue stream by the same ratio or even more over the same time, Cheng said.

The NT dollar closed last Friday at NT$32.554 against the greenback on the Taipei foreign exchange market, with a drop of NT$0.134 from NT$32.420 the previous day. That was the highest in almost four years.

As a result, Quanta Computer Inc (廣達) and Compal Electronics Inc (仁寶電腦) are unlikely to achieve their original sales growth expectations of 15 percent and 10 percent this month, respectively, Cheng said.

Quanta, the world's largest laptop maker, generated NT$40.10 billion in sales last month, up 31.26 percent from NT$30.55 billion in September.

Compal saw its sales rise a record 21.9 percent month-by-month to NT$23.11 billion.

If the NT dollar continues to surge, foreign investors may have to cut their revenue forecasts for next year, Cheng said, as their forecasts were made on an exchange-rate level of between NT$33.5 and NT$34 to US$1.

Local industry leaders are once again begging the central bank to intervene.

"The authorities should do something to stem the NT dollar from large-scale fluctuation that leads to a great impact on the nation's [export-oriented] industries," said Luo Huai-jia (羅懷家), executive director of the Taiwan Electrical and Electronic Manufacturers' Association (TEEMA, 電電公會).

The association has about 4,200 members.

Luo called on the government to formulate assistance measures, such as low-interest loans, to help the highly profitable sector to weather current "difficulties."

The Chinese National Federation of Industries (CNFI, 工商協進會) also said in a statement that the rising local currency has greatly eroded the competitiveness of the local textile sector.

In response, a government official yesterday called on local manufacturers to speed up the globalization of their business operations as a way to reduce the negative impact of a weaker US dollar on their exports.

Vice Minister of Economic Affairs Steve Chen (陳瑞隆) said that the continued appreciation of the NT dollar against the greenback shows the importance of globalizing business operations.

But Chen said the ministry is not worried that this appreciation will accelerate domestic manufacturers' "go west" policy.

He also said that the NT dollar's recent appreciation was "acceptable," because the Japanese yen and the Korean won have appreciated against the US dollar even more sharply over the past two weeks.

While a strengthening NT dollar has an impact on export prices, import prices for semi-finished products, raw materials and key spare parts and components required for export product manufacturing are also falling at the same time, he said.

Although the Chinese yuan is also facing growing pressure to appreciate, it is still pegged to the greenback, thus leaving Taiwan in a more advantageous position than Japan and South Korea, Chen said.

Local manufacturers with operations in China can therefore directly export from China those items which are prone to be affected by foreign exchange fluctuations, he said.