Taiwan exports to India keep rising as rest of world orders less
- Relatively unscathed by the US-China trade war, India imported nearly 18 per cent more from Taiwan in 2022, year on year
- But Taiwan’s global export orders saw a year-on-year decline of 18.3 per cent last month, valued at US$42.12 billion
India, a growing economy with its own chip sector, has increased imports from global tech hardware centre Taiwan as other parts of the world order less amid slowing consumer demand for electronics.
The world’s second-most-populous nation imported US$5.32 billion worth of goods from Taiwan in 2022, up from US$4.52 billion in 2021 and US$2.6 billion in 2020, according to Taiwan’s Ministry of Economic Affairs.
In a mid-March social media statement, the ministry also said that the value of imports topped US$1 billion in the first two months of this year, up from US$718.4 million a year prior.
India’s population of nearly 1.4 billion, and not being part of US-China trade disputes, have fuelled its drive for imports, the ministry said.
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Taiwanese manufacturers have also opened plants in India as the US-China trade war made it costlier to send goods from mainland sites to the US. And the mainland’s strict Covid-19 controls slowed factory production and shipping for nearly three years before being lifted in late 2022.
“The Indian economy is emerging fast, and semiconductor production is shifting to India,” said Hu Jin-li, a professor with the Institute of Business and Management at National Yang Ming Chiao Tung University in Taipei. “This is also a signal that Taiwan and India’s supply-chain positions are getting closer and more linked.”
Chemicals made up 22.9 per cent of Indian imports from Taiwan last year – the largest share of any type of goods – followed by electronic parts at 17.5 per cent.
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Officials in Taipei have urged Taiwanese businesses to invest in India and Southeast Asia over the past seven years, amid tense Taiwan-mainland political relations. Taiwanese businesses have invested in the mainland since the 1980s to take advantage of costs that are lower than those at home.
India’s economy is expected to grow by 6.5 per cent in the current fiscal year that ends March 31, and next year should see 5-6 per cent growth, according to calculations by a senior Asia analyst with financial services firm Gavekal.
The Indian technology industry is growing even faster, with market-analysis site ResearchAndMarkets.com forecasting that the chip sector alone will see a compound annual growth rate of 19.7 per cent from last year through 2026.
“Trade between Taiwan and India has grown because many international companies have chosen India instead of China,” said Darson Chiu, a research fellow with the Taiwan Institute of Economic Research in Taipei. “Taiwan’s manufacturers for these international companies export intermediate goods to India for downstream processing and assembly.
“India is slowly joining the Asian supply chain with respect to the pressure of the US-China confrontation and the fact that China’s economic policy is still unclear.”
As for Taiwan’s global export orders, those saw a year-on-year decline of 18.3 per cent last month, the economic affairs ministry said on Monday. The value of orders for February was US$42.12 billion.
Orders from the United States to Taiwan fell by 12.6 per cent in February, while shipments placed in the European Union were down 13.9 per cent, according to ministry data. Orders from mainland China and Hong Kong fell by 35.5 per cent.
The Conference Board think tank predicted on Wednesday that weakness would “intensify and spread” in the US over the coming months, with a recession starting in the second quarter.
Consumers in Europe, a key market for electronic devices, are grappling with inflation, and the European Commission expects the euro zone’s GDP to expand this year by just 0.8 per cent.
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Orders for Taiwan’s consumer electronics, the top export-order category at US$13.81 billion, fell by 21.9 per cent in February, year on year. Orders for information and communication products dropped by 20.3 per cent to US$11.77 billion.
“Taiwan’s industrial production and export orders should continue to reflect slowing growth in the US and European economies,” investment bank ING said in a Friday research note. “We do not think China’s growth can fill the gap.”
Manufacturing output in Taiwan decreased by 4 per cent in the fourth quarter of 2022, compared with a year earlier. The industrial production index declined by a steep 20.5 per cent in January, year on year.
But February data from Taiwan may mark a “bottoming out”, said Frederic Neumann, chief Asia economist with HSBC in Hong Kong. He pointed to “stronger-than-expected” demand in developed markets and a “rebounding economy in mainland China” that began lifting pandemic controls in December.
“The key question is whether this amounts to a mid-cycle bounce that will quickly give way to another leg down in exports, or whether this is the beginning of a sustained trade recovery,” Neumann said.
