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Taiwan's machine tool suppliers brace for brief downturn

2022/09/12 | By EDN

With the U.S. interest rate hike policy remaining unchanged, the Russian-Ukrainian war is showing no signs of stopping, and in addition, the exchange rate of the Japanese Yen and the Korean Won has greatly depreciated; these multiple factors present challenges to Taiwan's machinery industry.

Domestic companies, including Goodway Machine, Tongtai, Kao Fong, AirTAC, Hiwin, and other machine tools and components suppliers, have observed that the new orders received in H2 of 2022 are not as popular as in the first half of the year. Industry experts estimate that next year's machine tool factory shipments and performance will experience the impact thoroughly in the first quarter.

Hota Industrial Group Chairman Shen Guo-rong pointed out that in the first half of this year, the machine tool industry experienced an influx of received orders and shipments, but in the second half of the year, the market began to show signs of stagnation. Compared with the peak of the demand boom in March and April, orders received in June and July decreased by about 20%. In August and September, that demand fell further by about 30%, and it is estimated that orders received after November may decrease by 40%.

Shen said that the current market conditions, including mainland China, Southeast Asia, and Europe, are not good, and only Turkey and the United States are performing at a relatively better pace. As for Taiwan's machine tool industry, which is benefiting from the depreciation of the New Taiwan dollar and the falling price of raw materials, this year's revenue and profit should be better than last year, but judging from the current order status, the first quarter of next year will be viewed conservatively.

Yang De-hua, chairman of Goodway Machine, a major machine tool manufacturer, did not hesitate to say that global inflation is becoming more and more obvious, and the Russian-Ukrainian war is in a stalemate. Recently, orders have indeed declined, Yang said, expressing conservative revisions of the company's outlook for the year, originally expecting NTD$7 billion in consolidated revenue for the year, which will be revised down to NTD$6 billion to 6.5 billion.

Larry Wei, chairman of the Taiwan Association of Machinery Industry, pointed to the global economic downturn as the foremost reason behind Taiwan's declining exports in August. The export value was reported at USD$2.908 billion, a decrease of 14.0% from the previous month and a decrease of 2.0% from the same period last year.

Wei said that although the New Taiwan dollar has depreciated recently, currencies such as the Japanese Yen and South Korean Won have declined more than the New Taiwan dollar, affecting export orders.

He did not shy away from warning that the domestic machinery and machine tools industries will continue to face mounting pressure and challenges due to the current U.S. policy of sharply raising interest rates and the Russian-Ukrainian war.

AirTAC's consolidated revenue in August was marked at NTD$1.976 billion for key component factories, down 12.0% year-on-year, a six-month low. However, the company representative said that although shipments in the year's second half turned conservative, they believed the current loss represented a short-term impact and expect demand to rebound in the future months or next quarter.

Photo credit: UDN File PhotoPhoto credit: UDN File Photo