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Fri, Mar 22, 2002 - Page 18 News List

Production, export orders fall; but are set to rebound

PRODUCT-FLOW PROBLEMS February export orders fell 5.1 percent from a year earlier to US$10.16 billion while factory production fell 11.5 percent year-on-year

BLOOMBERG , TAIPEI

Taiwan's export orders and factory production fell in February as the Lunar New Year holiday shut factories and businesses, though rising US demand for mobile phones and computer chips may return them to growth in coming months.

February export orders fell 5.1 percent from a year earlier to US$10.16 billion, the Ministry of Economic Affairs said. Factory production fell 11.5 percent year-on-year.

For the first two months of the year together, orders rose 1.9 percent from a year earlier to US$21.48 billion and production declined 0.2 percent.

Taiwan's orders and production -- which fell for 10 straight months last year -- are returning to growth as faster US growth prompts customers to restock their inventories. Orders indicate shipments in two to three months.

"Many of our important customers are demanding more wafers," said Harvey Chang (張孝威), chief financial officer at Taiwan Semiconductor Manufacturing Co (台積電), the world's biggest made-to-order chipmaker.

"This is not from a single set of customers -- it's an across-the-board situation."

TSMC, which sold four-fifths of its chips to US customers in the fourth quarter, said it may boost capital spending this year as semiconductor demand rises.

Rising overseas demand will probably help Taiwan's economy grow 0.5 percent this quarter from last year, snapping a three- quarter contraction, the government estimates. Export orders may expand as much as 2 percent this quarter and will keep accelerating for the rest of the year, said Chang Yaw-tzong (張耀聰), director-general of the ministry's statistics department.

"I do not rule out the possibility that monthly export orders will post double-digit [year-on-year] growth between May and July," Chang said.

However, Chang said his earlier forecast for annual growth this year of around five percent for export orders and manufacturing output remained unchanged.

Customers in the US, Taiwan's biggest market, increased orders by 2.7 percent last month from a year earlier, following a 0.8 percent gain in January, the ministry said.

Orders for telecommunications equipment surged 14.6 percent, suggesting demand for mobile-phone handsets and other goods is leading the rebound.

Orders for electronics, Taiwan's biggest export, fell 6.6 percent in February from a year earlier.

Orders from Hong Kong fell 5 percent, European orders slipped 13.9 percent and orders from Japan dropped 18.5 percent.

While rising US consumer spending and factory production are pulling Taiwan's biggest market out of recession, an export rebound may not gain momentum until later this year as customers wait for profit to rise before placing new orders.

"Corporate demand is still weak," said Cheng Hui-ming, chief financial officer at Winbond Electronics Corp (華邦電子), Taiwan's second-largest maker of computer memory chips by market value.

Global PC sales will probably fall 5 percent in the second quarter from the first before expanding later this year as companies delay upgrading machines, according to Salomon Smith Barney Inc.

"It's going to be a year of two halves," said Damian Gilhawley, an economist at KGI Securities Co (中信證券). "The first half will still be quite weak, and the second half strong."

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