FAIR WINDS:Low inflation and low inventory at home and abroad bode well for local manufacturers, but rising investment in robots and AI poses a challenge.
After growing by an estimated 2.62 percent last year, the nation’s economy is expected to expand 2.2 percent this year, as inventory levels for technology products remain low at home and abroad, boding well for Taiwanese firms in their supply chain, Yuanta-Polaris Research Institute said.
“The global landscape looks fair in the coming 12 months, with low inflation and low inventory in the US and in Taiwan,” the Taipei-based think tank said, adding that the backdrop renders inventory adjustment unnecessary.
TOP PRODUCERS
This would be favorable to Taiwan, home to the world’s largest contract chipmakers, chip designers, and makers of camera lenses, casings, touch panels and other critical components used in smartphones, laptops, connected vehicles and Internet of Things applications.
However, investment flows to advanced economies bear watching, as 75 percent of US-based manufacturing executives said they expect advanced manufacturing to improve productivity and create more localized production, the institute said.
Autonomous robots, integrated computational materials engineering, digital manufacturing, the industrial Internet and 3D printing are among the technological tools likely to make the biggest impact, Yuanta-Polaris president Liang Kuo-yuan said.
A combination of these tools could help reduce production costs and squeeze the need for intermediate goods and services that drives Taiwan’s export-oriented economy, he said.
The changing economic context could provide companies with a solution that is more local than global and US President Donald Trump is facilitating the transformation with sweeping tax reforms, he said.
“The changes merit attention, but policymakers in Taiwan have yet to grasp the gravity of the issue,” Liang said.
BRAIN DRAIN
The academic is also worried about an ongoing brain drain, which he said might evolve into a serious problem as the global trend of digitalization grows.
Taiwan lags behind South Korea and China in its ability to retain or attract talented professionals, he said, citing a report by the World Economic Forum.
A lack of policy stability and certainty, especially regarding Taiwan’s relations with China, is not helping, Liang said, as cross-strait ties sit atop the list of concerns among Taiwanese executives in service sectors.
As for manufacturers, foreign-exchange risks carry the heaviest weight, followed by international crude and raw material prices, and labor costs, Liang said.
CURRENCY
The greenback’s depreciation this year caught global currency analysts off guard, he said.
“Hopefully, the next central bank governor can help keep the local currency stable, allowing companies to better plan their budgets,” Liang said.
Yuanta-Polaris expects the New Taiwan dollar to trade at an average of NT$29.98 against the US dollar this year. |
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