BY JAMES HILL

A selection of these news stories are also covered in AmCham Taiwan’s Executive Sweet podcast, available to listen to here.

Taiwan Economy in Contraction

Preliminary government figures for the fourth quarter of 2022 show that gross domestic product fell 0.86% year-on-year (YoY), the sharpest drop since 2009.

Explaining the decline, the Directorate-General of Budget, Accounting and Statistics (DGBAS) noted that “pressure from inflation and interest rate hikes continued to suppress global demand, and the industrial chain continued to adjust inventories.” It also cited the ongoing pandemic in China, Taiwan’s largest trading partner.

Exports fell 8.63% overall from the last quarter of 2021, with exports to China and Hong Kong falling by an even larger 15.6%. For the whole of 2022, DGBAS reported GDP growth of 2.43%, down from the previously projected 3.06%.

According to the Ministry of Economic Affairs (MOEA), the industrial production index in December fell for the fourth month in a row, declining 7.93% YoY. Nevertheless, the index saw a slight increase of 0.88% for the full year.

The manufacturing category, which accounts for 93% of the industrial production index, recorded a decrease of 8.4% in December due to slowed activity in the flat-panel, chemical materials, metal, and machinery sectors, the Ministry added.

Despite the contraction and drop in exports, the domestic retail and hospitality sectors saw a rebound, the National Development Council (NDC) said. Retail sales rose 9.4% YoY in December, according to MOEA, which added that the sector recorded full-year sales of NT$4.28 trillion (US$140 billion) for 2022. December’s sales growth was driven by year-end promotions, purchases of goods and gift boxes for the Lunar New Year holiday, and sales of thermal products due to cold weather.

Another bright spot in the economy in 2022 was exports of semiconductors, which increased for the seventh consecutive year, according to Ministry of Finance data. Taiwan’s chip exports grew over 18% YoY, with industry leader TSMC accounting for over 50% of the global foundry market. Economists at Barclays said that although TSMC was building plants abroad, most notably in Arizona, Taiwan will still account for the bulk of its production, including its most advanced chips.

Cost of Living Erodes Wage Gains

Average real wage growth was eroded by inflation during the first 11 months of 2022, according to DGBAS data. Before adjustment for inflation, the average nominal wage in January-November stood at NT$44,371 (US$1,457), up 2.86% from the year before.

When taking inflation into account, real wages fell 0.11% YoY to NT$41,345, a steeper drop than the one experienced in 2021. DGBAS noted that Taiwan’s consumer price index (CPI) had stood at over 2% for much of 2021, exceeded 3% in March 2022, and remained at that level for several months.

Soaring prices of food, rent, and fuel have caused CPI growth to rise to 2.95%, the highest level in 14 years. Food prices were up 5.66%, rent by 1.68%, and fuel by 2.04% in 2022, the DGBAS said.

Airlines Add More Flights  

The aviation industry in Taiwan displayed signs of recovery after nearly three years of pandemic-related travel restrictions by announcing a plethora of new routes and special offers to entice travelers back to the skies.  

Low-cost airline Tigerair Taiwan plans to resume flights to Okayama, Ibaraki, and Sendai in Japan by the end of March, saying that discount fares would start at NT$1,699 (US$56) one-way. Meanwhile, Taiwanese flag carrier China Airlines plans to launch new direct flights to Chiang Mai, Thailand, and add or resume flights to London, Rome, and Vienna.  

EVA Airways and StarLux Airlines, Taiwan’s two other major international airlines, also plan to increase flights to Southeast Asia, North America, and Europe. Arrival numbers at Taiwan’s main gateway, Taoyuan International Airport, continue to rise, recording over 70,000 arrivals in one day in January, the highest since borders reopened in October 2022. Total passenger numbers for 2022 were 3,758,417, well below the pre-Covid record of 48,689,372 set in 2019.   

IPOs Expected to Rise in 2023  

Consultancy firm Deloitte and Touche estimates that the number of initial public offerings (IPOs) in Taiwan would rise modestly, from 47 last year to 50 this year, led by semiconductor, renewable energy, and biotechnology firms. Despite economic headwinds, the firm predicts IPOs will increase in the year’s second half as capital markets improve.  

According to Deloitte, concerns over inflation, monetary tightening, geopolitical disruption, and carbon emission reductions will likely continue to influence the market negatively, but inventory corrections completed in the second quarter of 2023 should mean a recovery in demand for goods and services will follow.   

Taiwan Drops in Investment Ranking 

The latest report from U.S.-based Business Environment Risk Intelligence (BERI) has ranked Taiwan 14th in the world for investment, down eight places from last year. The report, released in December, cited cross-Strait tensions as the primary reason for the drop. In Asia, Taiwan came in fifth place behind China, South Korea, Singapore, and Indonesia.   

Taiwan’s Ministry of Foreign Affairs said that Taiwan remains a popular destination for foreign investors as a critical piece in the global semiconductor supply chain. The Ministry added that rising political tensions did not deter investments, citing Investment Commission data showing approved foreign direct investment increased 85% in the first eleven months of 2022.  

Employees Eye New Year Jobs  

Over 90% of Taiwan employees surveyed by online job bank Yes123 were considering changing jobs after the Lunar New Year, the highest percentage in 14 years. Disappointing pay, poor industry outlook, and unfavorable promotion prospects were the main reasons cited.  

More than half (61%) cited low pay as the primary reason for searching for new opportunities, followed by poor industry outlook at 44% and lack of promotion opportunities at 43%. Many workers in Taiwan traditionally look to change jobs after the Lunar New Year, when companies pay out generous year-end bonuses. The Lunar New Year fell on January 22 this year.  

Respondents listed TSMC, Evergreen Group, Taiwan High Speed Rail Corp, and Cathay Financial Holdings as some of the most desirable companies to work for.   

TSMC Forecasts Drop in Sales 

Taiwan Semiconductor Manufacturing Co. (TSMC) said that it expects first-quarter sales to drop 14% from the previous year. The prediction followed consolidations of inventory in the global IC industry. The world’s largest semiconductor manufacturer predicts January-March sales to fall by between US$16.7 billion and US$17.5 billion.     

The company also reported high sales figures for the last quarter of 2022, which helped its net profit to exceed NT$1 trillion for the first time in its history.   

Japan Becomes Taiwan’s Biggest Fruit Importer  

Japan now imports more Taiwanese fruit than any other country, overtaking China in 2022. Exports to Japan rose 11% YoY to US$850 million, accounting for 46% of total exports. Prior to a 2021 ban by China on Taiwanese pineapples, sugar apples, and other fruits, the Chinese market was worth 80% of total fruit exports. Last year China accounted for 1.6% of exports.   

After China announced its ban on the fruit in March 2021, Taiwanese pineapples gained a welcome boost from former Japanese prime minister Shinzo Abe, who shared a photo of himself posing with a box. The largest export market for Taiwan’s agricultural products in 2022 was the United States at US$4.6 billion, followed by Japan at US$1 billion.