‘If they don’t buy, there are no orders’: US, EU ripples felt in Taiwan

Global tech hardware hub Taiwan suffered a 14th consecutive month of decline of its export orders last month, with low odds of a quick turnaround until consumers in the West escape the impact of high interest rates, analysts said.

Orders for Taiwan’s exports fell by 4.6 per cent in October, year on year, to US$52.87 billion, the Ministry of Economic Affairs said on Monday.

“End-user demand in the US and Europe remains weak,” said Darson Chiu, a research ­fellow with the Taiwan Institute of Economic Research in Taipei. “If they don’t buy, then there are no orders.”

He blamed the impact of high interest rates in the West, which often raise consumer prices due to the higher costs of borrowing.

We expect the US and European economies to grow very little in the coming quarters, as higher interest rates start to biteLouis Kuijs

The European Union’s economy would expand by just 0.6 per cent this year before expanding by 1.3 per cent in 2024, according to forecasts from the European Commission.

A 2.4 per cent economic gain is expected in the US this year, followed by 0.8 per cent in 2024, according to the The Conference Board research organisation.

“We expect the US and European economies to grow very little in the coming quarters, as higher interest rates start to bite,” said Louis Kuijs, chief Asia-Pacific economist at S&P Global Ratings.

Hi-tech equipment, namely consumer electronics and their parts, comprises about 30 per cent of Taiwan’s economy. The island supplies some 60 per cent of the world’s semiconductor chips, including the most advanced.

Europe cut orders from Taiwan by a massive 45.8 per cent in October, year on year, and while US orders eased by 1.4 per cent, it remained Taiwan’s largest market with US$17 billion in commitments.

Orders from mainland China and Hong Kong combined crept up by 1.2 per cent.

Global commitments to buy Taiwan’s consumer electronics, the top category with US$18.81 billion of value in October, fell by 0.3 per cent year on year.

Orders for information and communication products, meanwhile, slid by 5.2 per cent compared to a year earlier to US$17.5 billion.

Global sales of smartphones had fallen 8 per cent year on year in the third quarter, according to market research firm Counterpoint, but it said handset sales growth in China averaged 11 per cent throughout most October.

Demand for phones and PCs with stronger artificial intelligence applications would eventually drive exports, especially early next year, said Woods Chen, head of macroeconomics at Yuanta Securities in Taipei.

But any gains in orders into the first half of 2024 would reflect mainly a comparison to the ultra low rates of early 2023, Chiu at the Taiwan Institute of Economic Research cautioned.

Exporters saw business fall earlier in the year as consumers wound down purchases of PCs and phones for work from home and home study during the coronavirus pandemic.