January 21, 2019 / 9:52 AM / 10 months ago

Taiwan's December export orders shrink the most since April 2016

TAIPEI (Reuters) - Taiwan’s export orders in December suffered their steepest fall in more than two and a half years, increasing concern about global demand for the electronic gadgets pivotal for the island’s export-reliant economy.

A truck drive near containers at Keelung port, northern Taiwan, March 20, 2016. Picture taken March 20, 2016. REUTERS/Tyrone Siu

Orders fell 10.5 percent from a year earlier to US$43.38 billion, Ministry of Economic Affairs data showed on Monday.

The shrinkage was the biggest since an 11.1 percent tumble in April 2016, and more than the most pessimistic forecast in a Reuters poll that had a median forecast of a 3.2 percent contraction. November orders dropped 2.1 percent.

Taiwan’s orders are a leading indicator of demand for Asia’s exports and for hi-tech gadgets, and typically lead actual exports by two to three months.

Ministry official Beatrice Tsai said it is “not too optimistic” that first quarter orders growth will be strong.

While 2018 orders hit a record high by volume, December ones “were lower than expected because the demand for high-end smartphones was cut back a lot, entailing decreased demand in the supply chain,” she said.

That weak demand “impacted orders for the supply chain. It wasn’t as good as in the past,” Tsai said.

The ministry said it expects January export orders to decline by 11.8 to 14.1 percent from a year earlier.

GLOOMY PICTURE

December’s continued contraction of orders fits with the gloomy short-term picture the island’s major tech firms have given.

Taiwan Semiconductor Manufacturing Co (2330.TW), the world’s largest contract chipmaker, last week forecast its sharpest revenue fall in a decade in the first quarter, and predicted weak smartphone demand will weigh on it until new launches in the second half.

On Jan. 2, tech giant Apple Inc (AAPL.O) took the rare step of cutting its quarterly sales forecast, with Chief Executive Tim Cook blaming slow iPhone sales in China.

The results rippled through at Taiwan’s Foxconn, a key Apple supplier, which reported a 8 percent fall in its December revenue that dampened its performance in 2018. It attributed the December fall mainly to a decrease in demand for consumer products.

Last month’s orders from the United States increased 5.6 percent from a year earlier, compared with November’s 5.4 percent rise.

Those from China dropped 10.3 percent, compared with a decline of 8.9 percent in November. Orders from the European Union fell 28.1 percent, from November’s 5.7 percent fall, and from Japan rose 2.6 percent.

Johnny Jiang of Masterlink Securities Corp predicted the first half of the year “will still be impacted by the U.S.-China trade war, and sales for the iPhone won’t be good”.

While orders will slide for some time, “we shouldn’t be too overly pessimistic about this,” he said.

Reporting by Yimou Lee; Additional reporting by Emily Chang; Writing by Jess Macy Yu; Editing by Richard Borsuk

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