July 21, 2014 / 9:22 AM / 3 years ago

UPDATE 1-Taiwan June export order growth fastest in 1-1/2 years on strong tech sales

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* June export orders up 10.6 pct y/y vs 6.98 pct in Reuters poll

* Orders from China soar 14.5 pct, the U.S. rise 6.7 pct

* Shipments to Europe up 15.2 pct, Japan 4.2 pct

By Faith Hung and Emily Chan

TAIPEI, July 21 (Reuters) - Taiwan's export orders in June grew at their fastest pace in 1-1/2 years, beating expectations, as its manufacturers rushed to fill orders for new smartphones from Apple Inc and others.

The island's technology sector is gearing up to ship new products, including the much-anticipated iPhone 6 and new iPads, that are expected to hit shelves this fall, raising prospects for its suppliers and assemblers.

Taiwan is one of the world's leading exporters of electronic goods and boasts a number of suppliers for foreign hardware heavyweights such as Apple Inc.

But it is subject to the boom-bust cycles of the tech sector and faces intensifying competition from regional rivals in South Korea and China.

Export orders in June grew 10.6 percent from a year earlier, the Ministry of Economic Affairs said on Monday, and much better than a median forecast of 6.98 percent in a Reuters poll.

The ministry said, discounting distortions from the Lunar New Year, it was the best growth since the end of 2012. According to Reuters data, it was the strongest single-month growth since January 2013.

"Demand for electronics goods rose 17 percent year on year, mainly because demand for handheld devices continued to grow, especially high-end smartphone models at affordable prices grew fast," the ministry said in a statement.

"That was the main driver boosting demand in chips and DRAMs supply chains... China and Hong Kong, in particular, grew more followed by ASEAN countries and the U.S," the ministry said.

Export orders increased by 4.7 percent in May, far slower than expected, as weakness in precision products such as flat panels kept activity in check.

Actual exports nudged up 1.2 percent in June, slightly below forecasts.

Orders from China posted the biggest growth year-on-year, rising 10.6 percent, while those from the United States saw a 6.7 percent gain.

"Lower-than-expected sales during the May 1 holiday in China led to a delay in fulfillment in orders from some major players in IC design like MediaTek, which pulled some demand to this time frame instead," said KGI Securities' analyst Andrew Tsai.

But Tsai said the pace was unlikely to sustain, with other sectors such as industrial products set to benefit more from the Chinese government's targetted stimulus plans.

Orders from Europe soared 15.2 percent from the year-ago period, while those from Japan rose 4.2 percent.

Export orders lead actual exports by one to two months and are a leading indicator of worldwide demand for tech gadgets. Orders include those from Taiwanese-operated factories overseas, while actual exports only count domestic output.

Hon Hai Precision Industry Co Ltd, the world's No.1 contract manufacturer of electronic goods, will start production of Apple's next-generation iPhone this month, according to local media.

Likewise, the world's largest contract chip manufacturer Taiwan Semiconductor Manufacturing Co Ltd, widely believed to be providing chips for the new phone, said recently it was targeting record revenue this year.

Intel Corp also recently issued a strong revenue forecast on a rebound in the once-moribund PC sector.

But it will hardly be smooth sailing for Taiwan's tech exports in the months ahead. Tsai of KGI Securities said competition was heating up between Taiwan and South Korea in sectors such as semiconductors, which is showing signs of moving toward Korean firms such as Samsung Electronics Co Ltd .

"It's possible that the second half of the year could be a turning point in Taiwan's chip dominance," Tsai said. "This could end up a long-term challenge for us." (Additional reporting by Michael Gold; Editing by Jacqueline Wong)

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