Weakness in emerging markets takes toll on Taiwan's exports

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: September 25, 2012 6:00 am ET

Related to this story

Topics Machinery

TAIPEI, TAIWAN (Sept. 25, 3:30 p.m. ET) — Slowdowns in emerging markets, including China, Vietnam and India, hurt results for Taiwan’s large plastics and rubber machinery sector in the first half of the year, although there were bright spots in Thailand and Indonesia.

Taiwan — which claims to be the world’s fourth-largest exporter of plastics and rubber equipment — saw a slight drop in its overall plastics and rubber machinery exports in the first half of the year, down 2 percent to US$631.7 million, led by a 7.5 percent fall to its largest market, mainland China.

Speaking at a Sept. 21 news conference on the opening day of the Taipei Plas show, industry officials said they considered the small drop acceptable — one trade association leader termed it “remarkable” considering the fragile state of the world economy.

But the figures were gloomier in some major sectors: sales of injection molding machines dropped 17 percent, for example.

The overall falloff is a sharp swing from 2011, when Taiwanese machinery exports rose 14.4 percent on growth from the BRIC nations — Brazil, Russia, India, China — and other emerging economies.

Taiwanese officials said the cooling in emerging markets stems from problems in the U.S. and Europe.

“The impact of the sluggish U.S. economy and European debt crisis was the main reason for the decline, which resulted in reduced purchases of machinery in emerging markets,” said David Wu, chairman of the Plastic and Rubber Committee of the Taiwan Association of Machinery Industry.

Wu, who spoke at the opening day news conference, also is general manager of Taiwanese molding machine maker Multiplas Enginery Co. Ltd. of Gueishan Township.

Machinery exports to Vietnam, Taiwan’s fourth-largest market, were down 18 percent. Exports to India, its fifth-largest market, were down 40 percent, a drop that Taiwanese executives said surprised them and reflected India’s weakened currency.

But other markets were showing resiliency, according to figures released at the fair.

Exports to Thailand, which is Taiwan’s second-largest export market, rose 48 percent in the first half, although a significant portion of that could be from one-time business, as plastics processing companies replaced large amounts of equipment destroyed in severe floods there last year.

One Taiwanese injection molding machine supplier, Fu Chun Shin Machinery Manufacture Co. Ltd. of Tainan, said one flood-related order from Thailand was for 300 machines.

Indonesia, as well, was strong. Plastics and rubber machinery exports there rose 4.5 percent in the first half of the year, on top of a big jump of 29 percent in 2011, making it Taiwan’s third-largest market. Interest in Indonesia was high, judging by conversations with exhibitors at the fair.

Indonesia is the world’s fourth-most-populous country, with a population of 242 million people. It is attracting foreign investment because of a stable political environment and GDP growth, said Bush Hsieh, one of the vice chairman of the plastics machinery committee and director of blow molding equipment maker Chumpower Machinery Corp. of Taichung.

David Chang, vice general manager of Multiplas, said Indonesia may be gaining favor over Vietnam because it has three times as many people and is seen as a more viable long-term alternate source of workers than Vietnam. “People don’t think as much about Vietnam as five years ago,” Chang said.

The widespread slowdown, particularly in China, has Taiwanese officials looking to expand in other markets, including the Middle East, Africa and Southeast Asia.

Organizers of Taipei Plas, for example, said they targeted nine emerging markets to bring in delegations of buyers — Vietnam, Indonesia, India, the Middle East, Turkey, Russia, South Africa, Brazil and China.

The plastics industry of Taiwan and its 23 million people, roughly the population of Texas, is sizable.

Its companies make 15,000 injection molding machines a year — five times the number sold in the U.S. each year and more than the 12,500 units made annually by Japanese companies. Taiwan exports about 80 percent of its equipment.

Its machines are typically less-expensive, with a Taiwanese injection press selling for roughly one-third to one-fourth the cost of a Japanese model, Wu said.

The slowdown in China hit hardest.

Taiwanese robot maker Alfa Auto Machinery Co. Ltd., for example, is selling 20 percent fewer robots in China this year than 2011, a sign that even as wages and other costs rise sharply in China and companies look to automation, spending is tight, said James Huang, general manager of the Taipei-based company.

“Overall it is true that the Chinese market is declining,” said Wu. “For those injection molding machines made locally in China, the decline is as much as 50 percent.”

Wu said Taiwan’s industry needs to keep upgrading its technology and selling integrated systems of machinery, rather than single units, to stay competitive against machine makers in China, India and other markets.

“The Taiwanese plastics and rubber machinery industry should actively explore emerging markets, enhance [research and development] for new products and upgrade their technologies,” said John Hsu, chairman of the Taiwan Association of Machinery Industry.

Taiwan’s plastics sector has advantages in technology-intensive products, with 95 percent of the plastic components in the Apple iPhone made by Taiwanese companies, Wu said.

The fair, held Sept. 21-25 in Taipei, attracted 475 exhibiting companies. Officials were expecting attendance of about 16,000.


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Weakness in emerging markets takes toll on Taiwan's exports

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: September 25, 2012 6:00 am ET

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