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Taiwan Manufacturing Industry Sees Production Decline 7 Percent In 3Q19

Production of Taiwan’s manufacturing industry totaled NT$3.37 trillion in the third quarter of 2019, down 7.01% on year, making the third consecutive quarter of on-year declines due mainly to the US-China trade tensions, according to figures from Taiwan’s Ministry of Economic Affairs (MOEA).

MLCC, which was in serious shortages a year ago, is now seeing Taiwan-based suppliers cutting production, while output for LED chips, solar cells, LCD panels and related components sectors all slipped sharply from a year ago with expanded losses.

MLCC demand started freezing after the US-China trade tensions began in June 2018, and capacitor production continued trending down in the third quarter of 2019 with most players’ revenues and profits dramatically undermined.

The industries of LCD panel and related components such as color filters and glass substrates also saw their combined production value dip over 20% on year to only NT$184.2 billion due to capacity expansion by Chinese makers and oversupply.

Taiwan’s panel output for the niche market segments were not affected much by China’s competition, but sharp drops in TV panel pricing have created enormous pressure, creating losses to Taiwan’s large-size panel makers. Mainstream-size TV panels even fell below cash cost levels. AU Optronics (AUO) lost over NT$10 billion in the first three quarters of 2019 combined.

Although Taiwan makers were still able to remain profitable in IT-related panels, they face pressure from competitors gradually shifting more of their TV panel capacity to making IT applications.

The third quarter of 2019 was traditionally a strong season for the LED industry, but Taiwan’s makers all saw losses in the quarter with Epistar seeing its operating loss expand to NT$875 million in the third quarter with a negative 20.96% in operating profit margin.

The solar cell industry remained in the doldrums. Taiwan makers’ heavy losses over a long period of time have prevented them from making major investments in R&D to upgrade their technologies.

Although Taiwan makers have been seeking to develop tunnel oxide passivated contact (TopCon) cell and heterojunction (HJT) technology, their Chinese competitors may still be able to catch up fast with their advantages.

But Taiwan’s semiconductor industry saw its production rise 5.13% on year to come to NT$396 billion thanks to demandfor advanced manufacturing processes from globally first-tier clients and the acceleration of 5G commercialization.

Meanwhile, the ICT and optical product sector covering server and network communication products experienced a 25.85% on-year growth in production thanks to makers expanding production lines in Taiwan as a precaution against US-China trade tensions, rising demand for 5G infrastructures and camera modules in mobile devices. The growth was also the largest increase since the fourth quarter of 2011.

Although the US-China trade tensions are expected to continue undermining Taiwan’s traditional IT sectors’ production, emerging applications such as 5G, AI, high-performance computing, are expected to benefit Taiwan’s IC industry, fueling the momentum for Taiwan’s manufacturing industry in the fourth quarter of 2019, MOEA said. Digitimes

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