Taiwan's Exports See First Increase

Taiwan’s exports have experienced their first increase in 13 months, signaling a positive trend in the world economy and tech industry. The demand for semiconductor chips, particularly those related to artificial intelligence (AI), has contributed to this growth. In September, Taiwan’s exports rose by 3.4%, reaching a total value of $38.81 billion, according to the Ministry of Finance.

Analysts have pointed out that semiconductor sales have continued to grow globally due to the increasing demand for chips used in generative AI applications. In fact, the global market for AI chips was valued at $14.9 billion last year and is projected to reach $383.7 billion by 2032, according to Allied Market Research. Taiwan, with its renowned semiconductor design houses and the world’s largest contract chip maker, Taiwan Semiconductor Manufacturing Company, is well-positioned to benefit from this growing market.

“We have seen the tech downcycle hit rock bottom and it is slowly but certainly on its way upwards,” said Heron Lim, an economist with Moody’s Analytics in Singapore. Technology accounts for approximately one-third of Taiwan’s economy, and the country supplies around 60% of the world’s chips.

While exports of electronic components fell by 4.3% in September compared to the previous year, shipments of information, communications, and audiovisual products experienced a significant increase of 59.8%. This rally in demand was supported by an uptick in imports from mainland China, which is an important market for Taiwanese exporters. China’s import data for August showed some improvement, contributing to Taiwan’s export growth.

Taiwan sees mainland China and Hong Kong as its largest export market, with exports totaling $13.83 billion. Although there was an 8.8% decline compared to the previous year, it was less severe than the 21.9% slump observed in the first three quarters. Manufacturing activity in Taiwan has declined for seven consecutive months, but there are signs of a potential recovery. The purchasing managers' index rose by 2.7 points in September, indicating a slight improvement.

Despite the positive trajectory, analysts have cautioned that it will take time for shipments from Taiwan to return to pre-pandemic levels. During the early stages of the COVID-19 pandemic, consumers purchased PCs and smartphones for remote work and study, leading to a surge in export demand. While export growth is expected to recover partially in the fourth quarter, it is unlikely to reach the heights seen in 2021.

Furthermore, global interest rates could pose challenges to the recovery efforts of Taiwan’s exports. Heron Lim noted that the growth in exports will be a partial recovery, and it is uncertain how far it will go. Darson Chiu, a research fellow with the Taiwan Institute of Economic Research, highlighted that the growth may be influenced by the low base for calculations from September last year, rather than a significant increase in international demand.

Overall, the rise in Taiwan’s export numbers is a positive sign for the global economy and technology sector. The demand for AI chips is driving the growth, benefiting Taiwan’s semiconductor industry. While challenges and uncertainties remain, this upward trajectory is an encouraging development for Taiwan and the wider tech industry.