Taiwan's Exports Drop By Record 41.9% on Global Slump
By Janet Ong
January 7, 2009

Jan. 7 (Bloomberg) -- Taiwan's exports slumped by a record 41.9 percent in December on weaker demand from the U.S. and China for laptops, mobile phones and computer chips.

Shipments fell for a fourth month, extending the longest losing streak in almost seven years, the Ministry of Finance said in Taipei today. The drop was more than the median estimate of a 30 percent decline in a Bloomberg survey of 13 economists.

The central bank slashed its benchmark interest rate today to the lowest level since 2004 after plunging exports added to signs the economy is in a recession. The global economic slowdown has reduced orders for companies including Taiwan Semiconductor Manufacturing Co. and AU Optronics Co., prompting some to shut factories, freeze wages and pare employment.

"Exports are likely to remain in the doldrums in the first quarter," said Cheng Cheng-mount, an economist at Citigroup Inc. in Taipei. "Taiwan exports are mostly tech-related and demand has fallen as consumers stop buying because they aren't confident of what's ahead."

The central bank cut its key rate to 1.5 percent from 2 percent, the sixth reduction since late September. The economy shrank 1 percent in the third quarter from a year earlier, the first contraction since 2003.

Taiwan's export decline is being mirrored in economies across Asia. The World Bank forecasts international trade will shrink in 2009 for the first time in more than 25 years.

Asian Slump

Malaysia's shipments fell 4.9 percent in November, the second straight drop, its trade ministry said today. South Korea's overseas sales plunged 17.4 percent last month, a Jan. 2 report showed.

Taiwan's exports fell to $13.6 billion last month, compared with $16.8 billion in November. Imports declined 44.6 percent to $11.8 billion, resulting in a trade surplus of $1.86 billion.

The report was released after the close of trading on the stock exchange. The Taiex stock index rose 1.3 percent to 4,789.84. Taiwan's dollar gained 0.2 percent to NT$32.957 against the U.S. dollar.

"Slower exports will weaken domestic demand by generating less income for households and businesses," Sean Yokota, an economist at UBS AG in Hong Kong, wrote in a report today. "We expect the economy to fall into a recession."

China, U.S.

Shipments to China decreased 57.1 percent because of weaker demand for electronic components used in products assembled by the mainland for export. Shipments to the U.S. declined 23.5 percent from a year earlier. Exports to Europe fell 29.5 percent.

China and the U.S. are Taiwan's two biggest markets. Exports are equivalent to about 70 percent of the island's gross domestic product.

"Exports in the first half are likely to remain weak, before picking up in the second half," Lin Lee-Jen, director of the statistics department at the Ministry of Finance, told reporters.

Taiwan Semiconductor, the world's largest producer of chips designed by other companies, on Dec. 1 cut estimates for fourth- quarter sales and profits after shipments fell. The chipmaker asked employees to take unpaid leave, extending cost-cutting moves.

Global semiconductor sales will drop 16 percent as consumer spending declines, researcher Gartner Inc. said last month.

Taiwan's exports of electronic products dropped 43.4 percent last month, after falling 25.3 percent in November. Sales of electronics by companies including AU Optronics, the island's largest flat-panel maker, were worth $3.2 billion.

To contact the reporter on this story: Janet Ong in Taipei at jong3@bloomberg.net.
Last Updated: January 7, 2009 04:15 EST

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