We should not underestimate the impact of AU Optronics’ total net loss of NT$13.9 billion (US$484 million), or NT$1.58 per share, in the first quarter of this year. Given the low LCD panel prices worldwide, the poor performance of panel makers in general is understandable. The problem is that South Korea’s LG Display Co (LGD) only suffered a net loss of NT$3 billion in the same period. The earnings of AU Optronics were NT$93.2 billion, while LGD earned NT$143.3 billion. That means that the loss accounts for 14.9 percent of AU Optronics’ earnings, while LGD’s loss accounts for only 2.1 percent of its earnings. There is a gap of 12.8 percentage points between these two numbers. What is the cause of the huge gap between their operational performance?
Technology, management, scale and other factors have all contributed to the gap. However, the key factor is that LGD enjoys an exchange rate bonus, while AU Optronics does not. This can be explained by the rise and fall of the South Korean won and the New Taiwan dollar after the financial crisis in 2008. The US dollar was trading at 936 won before the crisis and 1095.7 won in late March this year, so the won had depreciated by 17.06 percent during that period. However, the NT dollar appreciated from NT$32.4 to NT$29.4 against the US dollar, or 9.26 percent. Since the won fell by 17.06 percent while the NT dollar rose by 9.26 percent, a gap of 26.32 percentage points separated the two currencies in comparison with the US dollar.
If we assume that the “competitive bonus” makes up half the actual depreciation, LGD enjoys a competitive bonus of 13.24 percentage points over international competitors — the main competitor being Taiwan — which roughly corresponds to the gap of 12.8 percentage points between AU Optronics’ and LGD’s operational performance. In other words, the greatest difficulty confronting the Taiwanese panel industry is the exchange rate handicap enjoyed by its competitors.
There are, of course, several factors that can affect operational performance, but the exchange rate is a major problem for the Taiwanese panel industry, as the nation’s two biggest competitors — China and South Korea — are both adopting a low exchange-rate policy.
Some wonder why Taiwanese companies don’t complain if that really is the case. The answer involves cross-strait relations and a company’s business plans. If a Taiwanese company wants to build an eighth-generation LCD panel plant in China, they need to invest US$4 billion. If the NT dollar appreciates by 10 percent, the Taiwanese company would save NT$12.8 billion on that investment.
The problem is that if no one says anything while the NT dollar continues to appreciate and people instead continue to invest in China, thus enjoying the positive exchange rate with the Chinese yuan, will Taiwan’s economy still have a future? Where will the public look for jobs? Will Taiwanese companies use this as an opportunity to abuse local workers? These issues were the focus of the anti-poverty demonstrations on Workers’ Day this year.
The administration of President Ma Ying-jeou (馬英九) seems to be attempting to raise Taiwan’s GDP per capita to US$20,000 this year by letting the NT dollar appreciate against the US dollar. However, this policy allows Taiwanese companies to exploit local workers. Even if the government were to reach its goal, what would that really mean?
Instead, the government’s goal represents the beginning of yet another economic disaster, a disaster that will affect Taiwan’s flat-panel and DRAM makers, the banks lending them money and the nation’s workers.
Huang Tien-lin is a former national policy adviser to the president.
TRANSLATED BY EDDY CHANG
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry