Foreign orders fall for the second month
Foreign orders fell at an annual rate of 5.9 percent to US$35.79 billion in May, which was the lowest amount in nearly two years, according to a report released by the Ministry of Economic Affairs ( , MOEA).
Even the MOEA did not anticipate the substantial decline, said Lin Leejen ( ), director of the MOEA Statistics Department. “Orders received in May and June indeed are not as good.”
Only orders for information and communication technology (ICT) products saw growth — by 2.3 percent — in May. Orders for electronics, precision instruments, base metals, machinery, plastic and chemical products all took a tumble — mostly by double digits.
As semiconductor fabrication plants make inventory adjustments, they receive fewer orders in May and June, noted the MOEA.
Due to low oil prices, orders for plastic and chemical products plummeted 16.7 percent and 11.7 percent, respectively. Orders for base metals dropped 16.5 percent because of oversupply and price competition carried out by other companies in Asia.
Orders for machinery, the expansion of which often signals a rising economy, also dropped for the second consecutive month. The reversal in orders is indeed a concern that the economy is slowing down, Lin said.
Chinese Supply Chains’ Impacts
Orders placed from China have fallen for five consecutive months. In May, the orders decreased by US$1.17 billion, which accounted for more than half of the overall foreign order decline.
It appears that supply chains in mainland China have ramifications beyond Taiwan’s panel industry, and have impacts felt faster than previously expected.
Taiwan’s semiconductor fabrication business remains competitive; however, firms focusing on integrated circuit design, and packaging and testing are all now under greater pressure, Lin said.
As companies roll out new mobile devices, introduce Internet of Things applications and Windows 10 compatible computers in the second half of the year, the MOEA projects orders for ICT and electronics products will climb up.
Growth May Slow in the Future
In the absence of other positive factors and high orders from the same period last year, the MOEA is not optimistic that foreign orders will grow in June. Therefore, foreign orders are likely to see three consecutive months of decline.
Past records show May and June tend to have similar amounts of orders. The figure registered at US$38.32 billion in June last year.
Orders will be somewhat restrained in the near future by fierce international competition and falling prices, Lin cautioned.
Non-tech industries will still be affected by low oil prices, petrochemical factories’ closures for annual maintenance and the steel industry’s excessive production capacity and falling prices, Lin said.
The amount of orders topped US$40 billion in the months between September and December last year. Given the high amount of orders, the MOEA does not expect high growth rates this year.
Container vessels ship out exports at a local harbor yesterday. Overseas orders totaled US$35.79 billion in May, a drop of 5.9 percent year-on-year, according to government statistics. Orders between January and May registered at US$180.47 billion, which represents a 0.6 percent decline from a year ago.