This week, the South China Morning Post, citing data from Taiwan’s Ministry of Economic Affairs, reported that Taiwan, the global powerhouse of semiconductor supply, is now seeing its export orders fall at a record rate, as demand for semiconductors has fallen
The SCMP report stated that orders for overseas shipments from Taiwan dropped by 25.7% compared to the same period last year, to $46.58 billion, marking the seventh consecutive month that reading fell. In March, the decline was also the most severe since January of 2009, as exports collapsed as the global financial crisis at that time took full effect.
In March Taiwan’s orders from mainland China and Hong Kong dropped by 33.8% year over year, as orders from the US and Europe fell by 20.7% and 33.8% respectively.
Taiwan’s consumer electronics sector led the decline in export orders. As the world’s largest producer of semiconductors, and supplying 60% of the world’s chip supply, the nation’s economy is heavily dependent on its hi-tech industry, as trade in computer chips and other hardware makes up roughly 30% of gross domestic product (GDP). However in March, consumer electronics orders fell by 29.4% year over year, as orders for information and communication products dropped by 26.3%.
Analysts say the fall in orders is attributable to the overall decline in demand for consumer electronics, like PCs and smartphones, as the Covid pandemic passed.
As the pandemic began, demand spiked due to homebound workers upgrading their hardware in preparation for working from home, and regular consumers, spending more time at home, upgrading their communication and entertainment electronics. Once the pandemic passed, consumers both, had less need for new electronics, and had already upgraded, even if they experienced demand.
In the fourth quarter of 2022, smartphone shipments fell by 18.3% year over year, worldwide, according to research from market research firm IDC. The fall was driven by, “significantly dampened consumer demand, inflation, and economic uncertainties.”
Analysts note that if there is no immediate recovery in semiconductor demand, Taiwan will face the prospect of an economic decline in the coming months.
In an interview with SCMP, Iris Pang, chief economist with ING, said, “Unless imports of Taiwanese semiconductor chips by the US and Europe increase, the year-on-year contraction should continue in the first half of 2023,” adding that if the Chinese economic recovery holds up, the situation could change in the second half of the year.
She added, “Demand for consumer electronics should rise and, therefore, demand for semiconductor chips should also increase.”
