Well the Dow Jones plummeted 7% yesterday. Did anybody expect anything better? I didn't and I am not holding my breath either. How is Taiwan doing? As I said yesterday I had dropped out of the loop for a little. While I have been away Foxconn has decided to layoff 1,500 workers in Hungary, more than half of their workforce in that country (Reuters article).
On the foundry side, both TSMC and UMC are looking to cut costs by as much as 20%. UMC are forcing employees to take one day a week of unpaid leave. TSMC is apparently looking to initiate a series of layoffs and also ask some employees to take a unpaid vacations (Softpedia article). The Guardian also reports TSMC has "slashed its fourth-quarter consolidated sales forecast to between T$63 billion ($1.9 billion) and T$65 billion from a previous forecast of T$69 billion to T$71 billion made in late October." (Guardian article)
Digitimes reports: "Due to falling demand of white-box handsets in China, market observers have lowered the expectations of MediaTek's November sales from NT$7.5 billion (US$225 million) to NT$7 billion. China handset customers cut orders unexpectedly in the second half of November, crippling MediaTek's sales last month, the company indicated." (Digitime article)
In the personal computing arena, a JP Morgan analyst said on Business Week PC sales are expected to decline by 5% over the next year. He also expects the average selling price of PC's to decline over the same period adding further pressure to the industry (Business Week article). Since some of the biggest PC companies are in Taiwan (ACER and ASUS), some of the biggest contract manufacturers for notebooks (Quanta, Compal, Inventec) and some of the biggest EMS/contract manufacturers are Taiwanese (Hon Hai), any decrease in the PC demand and any weakening in the PC supply chain will have a negative impact on the Taiwanese economy.
I must admit with every new news report I am increasingly pessimistic about the short-to-medium term future. A lot of companies are suffering now and even if they may survive the current crisis, they may have to spend a long time rebuilding their competitive advantage. However, the most compelling question is once this crisis is over, what will the new world order be? Things will change. Will countries like Taiwan start to realize that depending so heavily on a single market is fraught with danger and a diversified customer base reduces risk inherent in a single market? If they do wish to diversify what other markets are open to them? How can they penetrate those markets? Are those markets sustainable in and of themself? Are the risks of investing in those markets and building those markets lesser or greater than the current economic risk currently in the states?
The biggest sadness is the effect this is having on the average person in the street. I myself hope the companies can recover and jobs made available to many people. But until companies can justify the staff expenditure they will probably not be willing to hire new people and will more likely get rid of staff.
As I said, the short term future is a little scary.
No comments:
Post a Comment