Taiwan's ICT Overseas Production Proportion Hits Record High in June: MOEA

The Ministry of Economic Affairs (MOEA) recently announced Taiwan's export order value in the first half (H1) of the year hit a record high for the period, with the overseas production proportion also rising due to increasing exodus of Taiwanese manufacturers.

In June, Taiwan's average overseas production proportion hit an annual high of 52.1%, with that in the information and communication technology (ICT) industry reaching a record high of 90.7%. Even in the precision-instrument sector that has been supporting the island's economic growth, the monthly proportion climbed to 56.4%.

MOEA said that in June, orders landed by Taiwanese enterprises from China and Hong Kong totaled US$10.21 billion, up 14.5% year-on-year (YoY), with that from the Association of Southeast Asian Nations (ASEAN) being  US$4.75 billion, a record monthly high from the region, and that from Europe and Japan having risen continually month-on-month (MoM) for 11 and eight months, respectively.

Due to the higher comparison bases this year, MOEA said that new records may be difficult to set in 2015.

The China-South Korea Free Trade Agreement (FTA) is scheduled to become effective in 2015 to impact Taiwan's exports and industrial production index. MOEA believes the uptrend in Taiwan's overseas production is a way for local enterprises to evade worsening impact from Taiwan's slowness in regional economic integration.

According to MOEA's estimate, the China-South Korea FTA will impact about 25% of Taiwan's industrial production value, resulting in annual loss of US$3.16 billion to US$8.42 billion in export opportunities in the local steel-making, machine tool, automotive, thin film transistor-liquid crystal display (TFT-LCD), polarizer, petrochemicals, textile, and glass industries.

More and more Taiwanese enterprises choose to take orders in Taiwan but produce overseas, MOEA admits, because local enterprises worry about the island's grinding pace to be integrated into regional economies.

In recent years, Taiwan's overseas production proportions have been higher than 50%, but, according to industry sources, many sectors hit record highs in June, including ICT, electronics, precision instrument, chemicals, machinery, and mineral product.

MOEA officials say that regional economic integration will directly affect exports and production indexes of economically integrated  nations. Taiwanese firms have to think about developing overseas before the nation succeeds in regional economic integration, which is simply being realistic.