Taiwan’s exports have experienced a decline for the 11th consecutive month in July, but there is hope on the horizon as artificial intelligence (AI) applications gain momentum. The country’s July exports saw a 10.4% drop in value compared to the previous year, reaching $38.73 billion, according to the finance ministry. Although this decline is significant, it is still better than the 23.4% fall witnessed in June, which was the worst slump in nearly 14 years. Additionally, the current figures surpassed expectations, as a Reuters poll had predicted a 20.1% contraction.
While export-reliant Taiwan saw a return to growth in the second quarter due to resilient domestic consumption, exports themselves have remained weak. However, the finance ministry suggests that rising demand for high-performance computing, AI, data centers, and automotive electronics will likely boost export momentum in the second half of the year. Traditionally, this period sees an increase in orders ahead of the busy year-end shopping season. Although the ministry anticipates a continued contraction of exports between 5% and 10% for August, they believe growth may resume from September, with November being the most likely turning point.
Specifically, electronic components experienced a 7.9% decline in total shipments from the previous year, amounting to $15.61 billion in July. Semiconductor exports also faced a 6.2% decrease. Taiwanese companies like TSMC, the world’s largest contract chipmaker, are major suppliers to global tech giants like Apple Inc and Nvidia, in addition to providing chips for automobile manufacturers and lower-end consumer goods.
The weak demand for high-tech products from both the U.S. and China has been a contributing factor to Taiwan’s declining exports. However, China’s imports and exports fell even faster than expected in July, placing additional pressure on the Chinese government to provide fresh stimulus measures and support demand.
In terms of individual trade partners, Taiwan’s exports to China in July decreased by 16.3% compared to the previous year, amounting to $13.42 billion. This followed a drop of 22.2% in the previous month. Similarly, exports to the United States experienced a 3.3% decline in July, following a significant 25.2% year-on-year decrease in June.
July also saw a decline in Taiwan’s imports, which often serve as an indicator for the re-export of finished products. Imports dropped by 20.9% to $30.25 billion, outperforming economist forecasts of a 25.0% fall. This decline in imports followed a 29.9% drop in June.
In conclusion, while Taiwan’s exports continue to face challenges, there is optimism regarding the second half of the year. The demand for high-performance computing, AI, data centers, and automotive electronics offers promise for a potential turnaround in Taiwan’s export sector. Although the weak demand for high-tech products from the U.S. and China remains a concern, the government believes that growth will likely resume in the coming months. However, it is essential to monitor economic developments and global trade dynamics closely to assess the potential impact on Taiwan’s export-reliant economy.
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