Taiwan’s credit metrics have improved due to robust performance and a swift economic recovery from the COVID-19 pandemic, which allowed its external buffers to improve and reduce the need for massive fiscal stimulus, Fitch Ratings said yesterday.
GDP growth has been stronger since Fitch last year affirmed Taiwan’s rating at “AA-” with a stable outlook, the ratings agency said.
Preliminary data indicated that Taiwan’s economy expanded 8.2 percent last quarter, its best showing in more than a decade, Fitch said.
This created considerable upside risks to Fitch’s growth forecast of 4.5 percent for this year and builds on an impressive 3.1 percent expansion last year, when Taiwan was one of few economies to expand at all, it said.
Growth momentum is underpinned by the nation’s success in containing the pandemic and global demand for its electronics exports, particularly semiconductors, in which local firms are global leaders, it said.
Fitch expects exports of information and communications equipment, and electronics to remain strong this year and next year, given global supply shortages, it said.
Robust exports have also contributed to a reinforcement of Taiwan’s external buffers, with foreign-exchange reserves rising to US$541 billion last month, up 12.3 percent from a year earlier, it said.
Taiwan’s external finances are already among the strongest among rated sovereigns, and an improved net external credit position could lead to positive rating action, Fitch said.
Surging global demand for high-tech components should also have a positive spillover effect on domestic activity this year, as major semiconductor and high-tech manufacturers have announced aggressive capacity expansion plans in response to global supply shortages, it said, adding that it would boost private investment and the labor market.
A water shortage is unlikely to have a material impact on semiconductor production or planned investments, so its influence over the economy should be limited, Fitch said.
Rationing and recycling measures have helped support semiconductor output, it added.
However, other sectors such as agriculture have been affected, and tech firms would feel a larger impact if the “plum rains” fail to alleviate the water shortage, it said.
Another positive trend for the economy is the reshoring of Taiwanese manufacturers amid US-China trade friction.
The government’ latest figures show that 871 companies plan to invest about NT$1.2 trillion (US$42.87 billion) under three government programs.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts