TAIPEI: Taiwan's plunge in electronics exports in December could foreshadow a big drop for the mainland's overseas high-tech sales.

Many of Taiwan's electronic exports, such as semi-finished panels and chips, are components sent to factories on the mainland for final assembly, such as LCD monitors, cellphones and PCs, most of which end up in the United States and Europe.

The mainland relies heavily on overseas sales of tech and machinery products, which made up 80 percent of all exports in December, according to Reuters calculations based on mainland customs data.

That makes Taiwan's 54 percent drop in exports to the mainland in December - the worst on record - all the more alarming for its larger neighbor. Taiwan ships between $9 billion and $10 billion worth of exports each month, on average, to the mainland and Hong Kong, its largest market.

About 70 percent of Taiwan's electronics exports go to the mainland before being processed and reshipped to other destinations, said Luo Huai Jia, vice president of the Taiwan Electrical and Electronic Manufacturers Association.

"So, in some cases, it could take one to two months before Taiwan's figures are reflected in China's related exports data," Luo said.

Days after Taiwan reported a record 42 percent fall in December exports, the fourth-straight monthly drop, mainland authorities said its exports fell just 2.8 percent in the same month.

But if Taiwan is any indicator, the lag factor means that the decline in the mainland's tech exports could quickly gather pace.

After a modest export dip in September, Taiwan's exports faded rapidly, dropping 23 percent in November before last month's plunge.

In December, Taiwan's electronics exports to the mainland halved from a year earlier, while IT exports sank by two-thirds, Taiwan data released this week said.

By comparison, the mainland's exports of machinery, electronics and high-tech products in December dropped by 9 percent to $91.5 billion, according to customs data.

Still, analysts said the mainland probably won't suffer as badly as Taiwan, where specific issues were partly to blame for December's plunge.

Taiwan is home to some of the world's biggest tech firms, including top contract chip maker TSMC, global PC seller Acer and AU Optronics, a major LCD maker.

With Taiwan recording a 42 percent decline in December exports, the mainland's should have fallen by around 10 percent, according to Ma Tieying, an economist at DBS.

"But we saw only a 2.8 percent fall," Ma said. "So, that means Taiwan's own factors are also at play for such a huge decline."

Reuters

(HK Edition 01/16/2009 page1)