Taiwan export orders plunge 16% as global inflation fears outpace rising demand for AI gear
- December was not kind to manufacturers in the global tech hub of Taiwan, whose economy relies on the production of critical consumer electronics
- And for all of 2023, Taiwan’s export orders lost 15.9 per cent compared with 2022 and reached US$561 billion
Global tech powerhouse Taiwan has reported a steep monthly decline in export orders amid stubborn inflation in key parts of the world, despite growing demand for AI-related gear.
Orders for Taiwan’s exports in December fell by 16 per cent, year on year, to US$43.81 billion, the Ministry of Economic Affairs said on Monday.
Major world central banks are unlikely to lower interest rates in the first two to three months of 2024 because of lingering inflation, said Darson Chiu, a research fellow with the Taiwan Institute of Economic Research. Inflation over the past two years has dampened consumption in the West.
The US Federal Reserve is eyeing 2.4 per cent inflation this year before it eases to 2.2 per cent next year.
“The second half of the year is more likely the time when odds are higher for central banks to take some measures,” Chiu said.
Overseas commitments to buy Taiwan’s consumer electronics – the top category by value, at US$14.92 billion in December – eased 12.9 per cent, year on year.
Orders for information and communication products shed 25.3 per cent from a year earlier and ended the past month at US$12.27 billion.
For the full year 2023, Taiwan’s export orders lost 15.9 per cent compared with 2022 and reached US$561 billion.
US orders to Taiwan tumbled 21.6 per cent last month, year on year, according to the ministry data, though it remained Taiwan’s largest market with US$13.96 billion in commitments. European orders to Taiwan plunged by 39.4 per cent in December to US$6.74 billion.
Combined orders from mainland China and Hong Kong eased a relatively mild 3.5 per cent last month, year on year, to US$10.07 billion.
But continued global interest in tech hardware built for (artificial intelligence) AI computations may have tempered December’s decline in orders, according to analysts, who expect that the AI-related momentum will strengthen in 2024.
World PC shipments should grow by 3.4 per cent this year over 2023, with the integration of AI expected to “serve as a catalyst for upgrades”, tech-market research firm IDC forecast last month.
Consumer electronics and their parts lead a tech sector that covers about 30 per cent of Taiwan’s economy. The island also supplies an estimated 60 per cent of the world’s semiconductor chips, including the most advanced.
“Increasingly, we have the market generally beginning to push for new applications on the back of AI. So, as demand for this application grows, I think that should help,” said Tony Phoo, an economist with Standard Chartered Bank in Taipei, referring to advanced servers made for generative pre-trained transformer (GPT) functions.
And analysts expect the trend to become even more pronounced later in the year.
As inflation eases, “vendors can finally focus on product innovation and long-term strategy developments, laying down solid foundations for the year ahead”, market research firm Canalys’s senior analyst, Toby Zhu, said in a January 16 research note.
PC products with neural processing units will reach 17 per cent of all Taiwanese PC shipments this year, “making it the most important product in the Taiwanese PC industry in 2024”, said Chris Wei, senior industry analyst with the Market Intelligence & Consulting Institute in Taipei. A neural processing unit accelerates AI computations.
Wei forecast that brand manufacturers could “roll out corresponding product combinations” by the middle of the year.
