Taiwan's Nov. Export Orders Down 8th Consecutive Month and Looks Unlikely to Recover in Q1, 2016

Taiwan’s export orders fell 6.3 percent year on year, to US$40.76 billion in November, the eighth in a series of worsening monthly declines, according to the Ministry of Economic Affairs (MOEA). 

Lin Li-chen, director of the ministry’s Department of Statistics, points out that the November result was worse than the projections made by the department, and believes that such contraction will likely continue throughout the first quarter of 2016. Lin also fears that the export orders will further dwindle 10 percent to between US$39 billion and US$40 billion in December.

Lin points out that if export orders fail to recover year-on-year by March, the slump will then register the 12th month sequential decline, to mark a period of recession that equals its counterpart during the 2008 global financial meltdown.

She notes that although November is typically a peak order season for Taiwan’s exporters, likely due to rising demand driven by the Christmas shopping season, holiday travel and restocking by various buyers preparing for the New Year. But this November has been exceptional due to the widely reported weakening economic growth in China that is to hover around 6.5 percent in 2016, with its economic transition to impact demand for oil and steel; still unstable crude oil prices that are fluctuating around US$40 a barrel, with some calling even US$20-plus a barrel in the New Year. More potentially negative factors have included disruptive sentiment brought on by ISIS; generally predicted worsening economy in Russia; as well as the outcome of the American presidential elections, along with some market analysts pointing to certain American stocks being overvalued, all of which have imbued global economic mood with uncertainty to have kept international buyers reluctant to place orders.

Taiwan’s industrial sectors that have seen order reduction include information-communication technology (ICT), electronics, precision instrumentation, base metals, chemicals, machinery, and plastic/rubber products.

Orders in the precision instrument sector tumbled 21.2 percent from the previous year to US$2.16 billion due to weak liquid crystal display (LCD) panel demand, Lin says.

In the traditional manufacturing sector, export orders for plastics and rubber, chemicals, base metals, and machinery dropped 16.8 percent, 7.3 percent, 19.9 percent and 16.3 percent, respectively, from a year earlier.

Although some link the November reduction in Taiwan’s export orders to sagging orders from Apple for iPhone components, Lin says that smart phone makers in the ICT category received as many orders in November as they did in the same month of last year.

Nevertheless, industry executives point out that Apple orders have helped boost Taiwan’s export orders for only two months in 2015, unlike the relatively robust effect it had in 2014 that helped to drive the island’s order growth from September to January.

Basically summing up the overriding effect of the power of Apple orders, they say that the gradually weakening positive impact of Apple orders on Taiwan's ITC suppliers may indicate the Apple-model in Taiwan may be starting to run out of steam. 

In Taiwan’s ICT sector, laptop-PC makers received plunged orders in November while export orders placed with the electronics sector in November fell 2.6 percent year-on-year to US$10.67 billion. Lin attributed the decline to adjustments made to inventories of electronic products, as well as falling orders from Japanese LCD TV makers.

Throughout the Jan.-Nov. period, Taiwan’s export orders amounted to US$413 billion, slipping 3.6 percent year on year. Based on the Jan.-Nov. result, the ministry estimates the island’s total orders received by the end of 2015 at US$453 billion, the second highest in Taiwan’s export order history despite slipping 4-5 percent year on year.

Lin attributes the order slump mostly to the weak global economy, lukewarm market for commodities including oil and steel, and rising competition from mainland Chinese homegrown supply chains.

Another often overlooked but nevertheless significant cause of the said order reduction is the increased manufacturing of these orders at Taiwanese factories abroad. Lin estimates overseas manufacturing to account for 60 percent of the island’s total orders received in the first quarter of 2016, up from November 2015’s 59.7 percent, equaling about US$60 of every US$100 of orders received by Taiwanese makers to be built overseas in 2016.

The Ministry of Finance (MOF) points out that export order data is indicative of Taiwan’s export performance in the coming months. Sagging orders calls for the Taiwan authorities to watch vigilantly the nation's export performance in the coming months.

The ministry’s data show steadily weak  export in December, prompting the ministry to comment that Taiwan’s exports will further decline and likely drop at double- digit rate throughout 2015 if the December revenue ends up totaling sub-US$23 billion. The November export totaled US$22.1 billion, down 16.9 percent year on year.