September 20, 2019 / 9:33 AM / 24 days ago

Taiwan export orders fall most in five months on tepid smartphone demand

TAIPEI (Reuters) - Taiwan’s export orders fell the most in five months in August as tepid demand for smartphones outweighed an improving export outlook ahead of the peak year-end season for gadgets.

Friday’s data showed a sharper contraction compared with July in orders from many of Taiwan’s main trading partners. Demand for Taiwan-made products from the United States and China fell at a much sharper pace than the previous month, as the United States and China fight a trade war.

Total orders in August contracted for the 10th straight month, dropping 8.3% from a year earlier to $40.05 billion, data from Taiwan’s Ministry of Economic Affairs showed. That was worse than a forecast of a 2.3% decline in a Reuters poll and July’s 3% drop.

The ministry said the worse-than-expected orders were due to “conservative orders” from smartphone vendors as well as laptop manufacturers who had stockpiled inventory in the second quarter to avoid the higher tariffs brought by the trade war.

It also said a higher base from last year contributed to the sharp decline.

Huang Yu-ling, director of the ministry’s statistic agency, said orders could return to growth in December.

“It’s traditionally peak season in the second half and the orders could recover quarter by quarter,” said Huang, referring to the year-end holiday when smartphone vendors are set to launch products.

The ministry expects September export orders to decline 6%-8.1% on-year, but said a “gradual recovery” is expected in coming months thanks to the peak season and rising demand for new technologies including fifth-generation telecommunications (5G) technology.

Taiwan’s hi-tech factories are major suppliers for global tech giants such as Apple Inc (AAPL.O) and Qualcomm (QCOM.O), and the continued drop in orders suggests global electronics could remain soft for some time.

TRADE WAR DISRUPTION

Bucking a regional trend of growth downgrades, Taiwan’s government last month raised its 2019 forecast, citing companies moving production home from China to avoid higher tariffs as the trade war dragged on.

Some analysts are less optimistic about the growth outlook, citing lingering concerns over the trade war’s possible impact on the island’s export-reliant economy.

Similar to some trade-reliant economies in Asia, Taiwan’s manufacturers have suffered from trade war disruptions and slowing demand for tech products.

August orders from the United States fell 7.8% on-year, compared with July’s 1.6% decline.

Orders from China declined 8.9%, compared with a fall of 6.3% the previous month, while orders from European buyers slipped 7.0%. Japan orders were down 7.7%.

Reporting by Yimou Lee Emily Chan; Editing by Hugh Lawson

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