Wednesday, June 23, 2021 8:08 AM EDT
Taiwan's industrial production grew more than expected on a yearly basis, but details of the data show that chip shortage is still a critical issue.
Illustration photo - A printed circuit board is seen in front of cropped waving flags of USA and Taiwan
Source: Shutterstock
Industrial production rose more than expected but only for non-core manufacturing activities
Taiwan's industrial production rose 16.51% year-on-year in May compared to 13.62%YoY in April.
Most of the growth came from non-core manufacturing activities, including LED panels, chemical raw materials, equipment, and automobile parts, which combined contributed to 39% of total manufacturing production.
The core item, and the most important one - integrated circuits, only grew by 12.59%YoY, which is below the headline growth rate in May, and also slower than the growth of integrated circuits seen in April - at 16.02%YoY.
Expanding production line for chips, but where?
Our view is that the trend of non-core manufacturing growing faster than producing integrated circuits may continue.
First, the main element of producing integrated circuits is semiconductor chips, and that problem is still not resolved even with more rain in Taiwan. Covid-10 and electricity supply are still impacting chip production.
We believe Taiwanese manufacturers are producing more equipment and chemicals to produce more chips, which can be used both locally and for exports.
The latest export orders data shows that more than 40% of export orders were contributed by Mainland China and Hong Kong. But if we combine industrial production and export order data, some equipment and chemicals might have been produced for Taiwanese factories located in Mainland China to circumvent climate change-related risks.
TWD and GDP growth are under pressure
TWD's strength is under pressure as we believe the market has already priced in slower growth in chip production, which is the major reason for foreign capital entering Taiwan's asset markets. Our forecast for USD/TWD is 28.00 by the end of 2021. We may revise this forecast lower if Covid-19 lasts into 3Q21.
The risk of slower than expected chip production will continue to weigh on GDP growth.
Our forecast is 4.1% GDP growth for 2021.
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...
more
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.
less
How did you like this article? Let us know so we can better customize your reading experience.
