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EDITORIAL: Reading
between the lines
Many people probably find the use of technological terms like nanometer or
abbreviations like DRAM (dynamic random-access memory) in the headlines of
newspapers perplexing. It may even be tempting to skip over such technical
jargon, but for anyone who wants to know more about the state of the economy,
the latest business forecasts from local technological heavyweights are
essential reading.
Their comments often give an early glimpse of turning points in the economic
cycle. Developments in the chip industry are especially important because the
industry is the first link in the electronics food chain and also because Taiwan
is one of the world¡¦s top chip exporters.
On Thursday, Taiwan Semiconductor Manufacturing Co (TSMC) chairman and chief
executive Morris Chang (±i©¾¿Ñ) said he expected quarterly growth at the world¡¦s
top contract chipmaker to more than halve to 8 percent, compared with 20 percent
expansion last quarter. Even more worrying, Chang said that he expected ¡§a dip¡¨
in the fourth quarter, blaming the ¡§ailing world economy.¡¨
The unusual warning reinforces the pessimism of those economists who believe
that the nation¡¦s export and GDP growth will be much weaker than initially
forecast and highlights the unwillingness of government officials to admit that
the economy is losing steam.
Chang said TSMC would experience an inventory-driven downcycle next quarter and
in the first quarter of next year, as it did in 2008.
Perhaps the most recent forecasts are a closer approximation of economic
reality. These take the form of a bewildering array of GDP figures that range
from the government statistics agency¡¦s optimistic 3.55 percent forecast to the
forecast of 1.94 percent annual growth from Academia Sinica, which slashed its
GDP growth forecast from the 3.81 percent it predicted in December last year,
after axing its forecast for export growth from 5.15 percent to 0.87 percent.
TSMC is the first major technology company to report that performance will
decline in the fourth quarter and, given the deteriorating global economy, it is
unlikely to be the last. Watch out for more bearish news as earnings reports are
released over the next few weeks.
United Microelectronics Corp (UMC) is expected to post a 7 percent increase in
revenue quarter-on-quarter on the basis of technological migration and chips
that cut the circuit width to 40 nanometers, or even 28 nanometers, followed by
a 10 percent contraction next quarter.
UMC and TSMC generate almost half of their revenue making chips for handsets and
other communications products. TSMC supplies chips to more than 2,000 clients
around the world, with some chips going to gadgets like HTC Corp¡¦s One series
and Asustek¡¦s Transformer tablets.
From the perspective of the PC industry, Nanya Technology Corp, which makes
DRAMs, volatile memory chips used mostly in PCs to temporarily store data, on
Wednesday forecast an unusually flat third quarter, bucking the standard growth
expected during the back-to-school shopping season.
The company said the slowing global economy was dragging down PC demand.
With such a discouraging outlook for the communications and PC sectors, it is
highly unlikely that the nation¡¦s economy will escape unscathed.
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