The Nikkei Taiwan Manufacturing Purchasing Managers’ Index (PMI) dropped to 49.7 last month, from 51.1 in March, signifying a slight deterioration in the sector’s operating conditions, as weak client demand weighed on new orders and output.
The privately conducted PMI print suggested recovery remains elusive amid the slow season for technology products.
“After a bumpy first quarter, Taiwan’s manufacturing industry suffered another setback as seen in the PMI data,” said Annabel Fiddes, economist at Markit, which complied the survey.
Taiwanese manufacturers reported renewed declines in output and new orders last month due to tepid demand from both customers in Taiwan and overseas, the monthly report said.
That drove the new order index to fall at the fastest pace since October last year and the output gauge to decline for the second time in three months even though the latest reduction was marginal, the report said.
PMI surveys aim to analyze the health of the nation’s manufacturing industry with scores above 50 indicating expansion and values below the threshold suggesting contraction.
PMI data are important because Taiwan is home to the world’s largest chipmakers, chip designers, laptop and smartphone vendors, and components suppliers.
Input prices rose for the second month running last month, while output prices continued to decline, as companies sought to stay competitive and foster client demand, the report said.
Exactly one in four firms reported higher cost burdens last month, with a number of companies citing higher market prices for raw materials, such as steel and crude oil.
“Companies still lacked pricing power and discounted their charges to attract new business, despite a strongest rise in input costs,” Fiddes said.
The strategy combined with the fastest rise in input costs since the middle of 2014 indicated that a squeeze on operating margins intensified last month, Fiddes said.
The ongoing appreciation of the New Taiwan dollar would rub further salt to the profitability of exporters, whose earnings results are susceptible to foreign-currency exchange movements.
Inventories of finished goods continued to drop, extending the current sequence of reduction to 19 months, the report said.
However, the pace of depletion eased to the marginal rate and the slowest pace so far this year.
Companies attributed lower inventories to conservative stock control policies they introduced to cope with slow business, the report said.
Encouragingly, employment picked up across the sector to a nine-month high and some companies attributed higher staffing levels to new product development, the report said.
“Headcount growth might not be sustained if client demand fails to improve,” Fiddes said.
The official PMI compiled by the Chung-Hua Institution for Economic Research (中華經濟研究院) is due to be released today.
soft landing: The US’ rate-setting FOMC finds itself in a difficult situation as it seeks to address inflation through interest rate hikes while avoiding a recession The US Federal Reserve is widely expected to hold interest rates steady on Wednesday after a summer of mixed economic data, while leaving the door open to another hike if needed. The Fed has raised interest rates 11 times over the past 18 months, lifting its key lending rate to a level not seen for 22 years as it tackles inflation still stubbornly above its long-term target of 2 percent. Analysts and traders broadly expect the US central bank to hold rates steady on Wednesday in order to give policymakers more time to assess the health of the world’s largest economy. “We think
AI TREND: TSMC has been rapidly expanding capacity to meet a spike in demand for advanced packaging services, but still expects supplies to be tight for 18 months Arizona is in talks with Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) about advanced chip packaging, state Governor Katie Hobbs said yesterday, which is crucial for the manufacturing of artificial intelligence (AI) chips. TSMC, which is building a US$40 billion chip factory in the US state, has not announced plans to build facilities for advanced chip packaging in the US. Advanced packaging processes stitch multiple chips together into a single device, lowering the added cost of more powerful computing. “Part of our efforts at building the semiconductor ecosystem is focusing on advanced packaging, so we have several things in the works around that
NXP Semiconductors NV expects its first automotive-grade 5-nanometer chip built by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to become available for automakers within one-and-a-half years at the earliest, following demand for better computing performance and energy efficiency for connected vehicles, a company executive said yesterday. That would mean a significant upgrade from the 16-nanometer technology NXP adopted in its existing series of microprocessors. NXP chief technology executive Lars Reger made the remarks during a media briefing yesterday in Taipei. The latest updates came after NXP unveiled its plan to source 5-nanometer capacity from TSMC in 2021. This is Reger’s first trip to
Tailwinds: Blockbuster earnings at Nvidia Corp have sparked hopes of a tech sector boom; Taiwanese chipmakers are hopeful benefits will come to them too The worst could be over for the New Taiwan dollar as China’s economic recovery and a rebound in the chip industry will support the beleaguered currency, analysts said. The NT dollar is on course to weaken for a sixth month, the longest stretch since 2006, after foreign funds turned sour on its technology sector and risk sentiment deteriorated on slower growth in China. The tide seems to be turning now on nascent signs of stabilization in China’s economy — its biggest trading partner — following policy boosts. The yuan emerged as the best-performing Asian currency last week, followed by the Japanese yen