Face Up to the Dramatic Changes in the Operating Environment of Taiwan's Manufacturing Industry
Recently, major domestic and foreign institutions have successively announced global economic growth forecasts for this year and the following year. The main tone of each institution's outlook for the global economy is: the performance of the international economy and the stock market this year will be oscillating with the stoppage of the US-China trade war. Although the economic growth momentum is expected to pick up from this year, it may be far from satisfactory. The main reason is that the United States has gradually responded to the tax cuts and profits in the past two years, and the growth momentum will return to the normal track. China is affected by factors such as trade wars, debt leverage, and structural adjustments. The economic growth rate may go from "guaranteed six" to "dimensional five" "The new normal. In Europe, due to the unresolved Brexit issue, a major manufacturing country, Germany, was affected by the recession of the global auto industry and the economy suffered a severe impact, which caused the European Central Bank to restart quantitative easing and try to turn the tide.
Although there are no significant differences in the views of major institutions on the global economic outlook for this year and next, we believe that the latest IMF report deserves the attention of the Taiwanese government and industry. The Global Economic Outlook report released by the IMF in October is titled "Global Manufacturing Downturn, Rising Trade Barriers", explaining that the current increase in international trade wall stacks has been increasing globally. The manufacturing industry poses serious challenges.
The IMF pointed out that this year's global industrial production, new manufacturing orders and global trade volume have all declined to the lowest level in recent years. The sluggish manufacturing industry in advanced economies may further spillover into the service industry, thereby weakening the overall economic performance. The IMF report implies that the global manufacturing industry may enter a new situation of drastic adjustment from the past era of great stability.
The focus has been drawn back to Taiwan. Although the government and major economic institutions have recently revised Taiwan’s economic growth figures this year, the manufacturing and sales situation of Taiwan’s manufacturing industry faces the same challenges as the IMF’s description of global manufacturing. A few days ago, the Ministry of Finance announced the customs import and export statistics in October. Taiwan’s import and export value continued to tighten in October. The dollar-denominated import value decreased by 4.1% compared with the same period last year, and exports decreased by 1.5%. The Chao Chao grew by 18.9% over the same period of last year, and the Chao Chao also contributed to Taiwan's economic growth rate in that month. When the reasons for contributing to economic growth are contrary to common sense, it is not difficult to understand why when the government sings that this year's economic growth figures are brighter than other countries, the people are relatively uncomfortable, and news of industrial unpaid leave is still heard.
In fact, from the observation of production, sales and inventory figures, we can find that Taiwanese manufacturers are facing heavy operating pressure this year. According to statistics from the Ministry of Economic Affairs, in the first eight months of this year, the output value of Taiwan's overall manufacturing industry and three major sub-industries-the chemical industry, metal electromechanical, and information electronics industries all declined significantly from last year. From January to August this year, the output value of the overall manufacturing industry decreased by 5% compared with the same period last year, the output value of the chemical industry decreased by 8.5% annually, and the output value of the metal electromechanical and information electronics industries also decreased by 6.2% and 2.4% respectively over the same period last year. In terms of sales and inventory, the aforementioned three major manufacturing sub-industries have experienced sales declines and increased inventory this year. Compared with the aforementioned decline in output value, it is not difficult to see that this is the manufacturer's unclear sales prospects and actively seeking inventory detoxification targets. Low-capacity countermeasures have to be taken.
Regarding the price of raw materials, from the perspective of the supply chain, although the drop in the price of raw materials is conducive to reducing the input costs of upstream companies, it will also cause the price of midstream and downstream products to fall. In addition, falling prices are likely to delay demand downstream in the supply chain, thereby affecting the sales and profit performance of upstream players, which is especially noticeable in the petrochemical industry. This year's international crude oil prices have fallen by more than 10% compared with last year. Although the upstream petrochemical industry's crude oil purchase costs have decreased, the prices of petrochemical products have also declined simultaneously. In the first half of this year, ethylene prices fell by nearly 45% compared with last year, and propylene fell by 18%. The prices of polypropylene and other products have also been revised down by more than 10%. This is why the upstream petrochemical industry has benefited from lower costs this year, but is relatively conservative about market conditions and profit expectations.
In terms of the uncertainties caused by the US-China trade war, this year’s Taiwan’s manufacturing industry may be affected most by the machinery industry.
Mechanical equipment is an indispensable production factor in the production process of various industries. The US-China trade war has triggered the migration of global supply chains, which has caused Taiwan's machinery industry's exports to decline sharply this year, and its output value has also shrunk. The industry was originally optimistic that after the manufacturer readjusted the production line layout, the order demand would be replenished in the second half of the year. Unexpectedly, the trade war stopped and stopped, which made the global supply chain industry confused. Although many companies have moved their production capacity out of China, but Due to the weak global consumer confidence, it has dragged down the investment confidence and expansion plans of supply chain operators, which has weakened the demand for machinery and equipment procurement. Many companies are also looking forward to the winter through unpaid leave.
In terms of product innovation, the one most affected by it is the information electronics industry. Among them, the semiconductor industry is the top priority of Taiwan's information electronics industry. Although recent emerging application concepts such as AIoT and 5G have driven a wave of semiconductor demand, according to market research institutions, the output value of Taiwan’s overall IC industry (including design, manufacturing, packaging and testing) will probably show zero growth this year, of which IC manufacturing is affected by memory products With the impact of a recession of more than 20%, the overall IC manufacturing industry may experience negative growth this year. Although the capital market has heard from time to time that domestic leading players in the IC industry have received new orders from time to time, as industry insiders have said: "A few leading manufacturers may not be able to sustain the rise and fall of the entire industry."
The general election is approaching. When the government is busy propagating its achievements, don’t forget that many current economic data have been decoupled from the current status of industrial operations. Don’t be complacent about economic growth figures and ignore the signs of changes in the industrial operating environment.
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