By Fanny Liu
TAIPEI--Output from Taiwan's factories, utilities and mines rose
to a record high in May, as demand for semiconductors and other
electronic components continued to rise.
The industrial output index--which counts only domestic
production--rose 5.19% year-over-year in May to 109.56, the
Ministry of Economic Affairs said Monday. It beat economists'
median forecast for a 2.26% increase, as U.S. businesses
replenished inventories more aggressively than some of them had
expected. The index gained 5.29% in April.
Although growth of exports and overseas orders in May have
disappointed many economists, in part because Taiwan has been
bleeding market share in television panels and smartphones, the
latest domestic factory data suggest that global demand is still
holding up well and overall exports could grow more quickly going
forward.
"The solid [industrial production] print for May provides
further evidence that Taiwan is well-placed to benefit from the
recovery in external demand, particularly from [the U.S., Europe
and Japan], and we look for this to be reflected in stronger
exports over the next few months," Barclays economist Waiho Leong
wrote.
Taiwan is one of the world's biggest suppliers of electronic
products and components. The island's output is often used to gauge
the health of the global economy.
Semiconductor output rose 11.88%, quickening from 8.09% growth
in April. Taiwan Semiconductor Manufacturing Co., the world's
biggest contract chip maker by revenue, produces advanced
microprocessors exclusively in Taiwan, contributing around 10% to
the index.
Although global smartphone and tablet sales have already passed
the stage of explosive growth, orders placed with TSMC's advanced
facilities continue to rise. TSMC, whose latest 20-nanometer
facility is supplying Apple Inc. with a chip called A8, has
forecast strong demand for smaller and more powerful
microprocessors for the rest of this year.
Personal computer and smartphone production, however, rose only
0.7% last month.
Television panels and related components production, however,
dropped 3.90%--worse than a 2.58% decline in April.
Taiwan's screens have been losing market share to South Korean
and Chinese rivals, which have invested heavily in advanced and
lower-cost technology for years. TV, computer and smartphone makers
in China have also increasingly relied on locally produced panels,
and have placed fewer orders with Taiwanese manufacturers.
As Taiwan also produces panels in factories across China, the
chronic decline in panel sales has weighed more on export orders,
which also count production outside Taiwan, than domestic factory
output.
Yuanta Investment Consulting economist Aidan Wang said U.S.
businesses will refill their stocks likely at a slower pace over
the next couple of months, after months of aggressively building of
their inventories as they recover from harsh weather earlier this
year.
But Mr. Wang said he expects output "will grow strongly again
toward the end of the third quarter, as long as the U.S. economy
grows solidly and many electronic brands launch new gadgets for the
holiday as expected."
Write to Fanny Liu at fanny.liu@wsj.com