October 20, 2015 / 12:39 PM / 2 years ago

New iPhone helps pull round Taiwan's falling export orders

A man uses Apple's iPhone as he holds prayer beads at an antique shop in Beijing July 31, 2013.Kim Kyung-Hoon/Files

TAIPEI (Reuters) - Taiwan's export orders fell by far less than expected in September as the launch of Apple Inc's latest iPhones boosted demand for the island's signature technology goods.

It was the sixth consecutive monthly fall, but the better than expected showing - export orders fell 4.5 percent compared with a Reuters poll forecast for a 12.7 percent drop - could signal the start of a turnaround for a struggling tech sector.

Taiwan's export orders are seen as a leading indicator of demand for Asia's exports and for hi-tech gadgets as they typically lead actual exports by two to three months.

Taiwan's economics ministry said the new Apple smartphones were behind the better than expected figures and that October orders would likely be up from September's value. It also said that the improvement in demand was also evident as companies' inventories were falling.

At $41.35 billion, September orders topped the $35 billion recorded in August to reach a nine-month high.

That will give the trade-reliant economy some encouragement going into the final quarter, when the year-end shopping would usually pick up. But Taiwan still faces the prospect that its economy contracted in the third quarter.

The "Apple effect", which helped Taiwan notch record export orders last year, won't be doing the same for 2015 as it has come too late in the year.

"There is a chance for orders to return to growth by the end of this year," said Aidan Wang, an analyst with Yuanta Consulting, in Taipei.

Many Taiwanese tech companies supply components that make up Apple gadgets, including contract electronics maker Hon Hai Precision Industry Co, casing maker Catcher Technology Co and camera lense maker Largan Precision Co. But a lot of them farm out the production to factories they run in China.

Among key categories, orders for electronics goods fell 5.6 percent, better than the 8.1 percent drop of August. Orders of information and communication goods rose 5.4 percent, also better than August's 4.7 percent growth.

The depreciation of the Taiwan dollar to the U.S. dollar helped orders, said Andrew Tsai, economist with KGI Securities Investment Advisory in Taipei, pointing out orders actually grew 3.4 percent when expressed in local dollar terms.

Orders from China fell 9.8, improving from the 14.8 percent drop posted in August, while at the same time those from the U.S. rose 0.6 percent, the same rate of gain as August.

The sight of economic growth in China slowing in the third quarter to levels unseen since the global financial crisis had sent a chill through Taiwan, as China is the island's largest trading partner.

"A broader and more sustainable growth will still rely on the recovery of mainland China," according to ANZ economists, who estimated Taiwan's orders contracted 8.7 percent in September from a year earlier when stripping out the effects of the information, communication and technology sector.

Major companies have tightened their belts in the expectation that they will have to wait until next year for demand to stabilise.

The world's biggest contract chipmaker Taiwan Semiconductor Manufacturing Co, also an Apple supplier, last week slashed its 2015 capital expenditure by more than 20 percent to a four-year low with executives saying they are seeing inventory levels at high levels.

Addtional reporting by Emily Chan; Writing by J.R. Wu; Editing by Simon Cameron-Moore

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