Taiwan Weathering the Storm

So the financial crisis is getting deeper. Trying to ignore it doesn't help. It seems there is not much anyone can do. Paulson in the states is trying to figure out a new rescue package but the markets must self correct before there is any hope of recovery. How much worse will it get? Nobody knows. Are we at the bottom yet? Nobody knows (but I suspect not). Taiwan hasn't escaped the storm however.

First up the Taipei Times reports the unemployment rate on the island hit a four year high. They said: "Global financial turmoil took the blame yesterday for pushing the nation’s unemployment rate up to 4.27 percent last month, a figure expected to continue climbing as the crisis unfolds." The Times continues writing: "The unemployment rate hit a four-year high of 4.27 percent last month, up 0.13 percentage points from a month earlier, defying a seasonal drop in unemployment normally seen at the end of summer, a report by the Directorate General of Budget, Accounting and Statistics (DGBAS) showed yesterday."

The Taipei Times also reports Nanya posted their sixth straight quarterly loss. The times says: "Nanya Technology Corp (南亞科技), the nation’s second-largest supplier of computer memory chips, yesterday posted its sixth consecutive quarterly loss, which it attributed to the collapse of chip prices over an unresolved glut and sagging demand." The Times continues saying: "In the quarter ending Sept. 30, net losses widened to NT$8.77 billion (US$265 million), compared with NT$1.66 billion a year earlier and NT$7.36 billion in losses in the second quarter."

Reuters reports Nanya's main Taiwanese competitor, PowerChip, also has had a rough time. According to Reuters: "Shares of Powerchip Semiconductor Corp Taiwan's top DRAM chip maker, fell more than 3 percent to a one-month low on Wednesday, a day after the company posted a record quarterly loss that was worse than forecast. At about noon, Powerchip shares had slid 3.4 percent to T$4.61, underperforming the main TAIEX's 1.4 percent fall."

Circuits Assembly (CA) writes the globabl financial meltdown is having an impact on EMS/ODM companies. According to CA:

There’s no question the broader economic situation is being felt at the EMS/ODM level. ODM shipments are dropping tremendously this year. The No. 1 company, Compal Communications, a supplier to Motorola, Nokia and LG, has seen shipments drop 33.3% from last year. No. 2 Quanta dropped 7.5%, while Qisda is down a whopping 50%. TPV dipped 14.3%, and Asus is down 6.1%.

CA continues:

The big question now is, Of the EMS companies and ODMs, who’s going to survive? And are there any likely bankruptcies? According to a new report by iSuppli, most firms are okay. However, without naming names, Pick suggested some firms could be in trouble during a recession. The iSuppli report, “Recession Hits EMS/ODMs,” is due out Nov. 7.

Digitimes reports leading IC Testing and LCD vendors have also seen a significant decline in their profits. According to Digitimes:

Two leading Taiwan IC testing and LCD equipment suppliers Mirle Automation and Test Research (TRI) have seen a decline in profits for the first three quarters of 2008 due to weak market conditions, according to the companies.

Mirle said that its pre-tax profits dropped 46% on year to NT$43 million (US$1.31 million) in September 2008 although its sales for the month were up 4% from a year earlier to NT$3.4 billion.

For the first nine months of the year, pre-tax profits totaled NT$440 million, down 24% from a year earlier, Mirle noted. FPD (flat-panel display) and materials handling equipment accounted for 55% of Mirle's total revenues.

There are many other doom and gloom stories out there. There is not much left companies can do until demand for computer products picks up again. Computer products in most households are luxury items and people will cut such items out of their budgets first. If the economy continues to slide there will be a lot of strife in the future and all these companies can really do is to continue working towards their strengths, staying as financially strong as possible (easier said than done), and getting ready for when the economy recovers. Until then, life is going to get increasingly uncomfortable for all those in the tech industry.

Taipei Times: Jobless rate hits four-year high
Taipei Times: Nanya posts sixth consecutive loss
Reuters: Powerchip shares hit 1-month low after record loss
Circuits Assembly: Recession Spells End of Foxconn Effect, Analyst Says
Digitimes: IC testing and LCD equipment vendors report declined profits for Jan-Sep period