From the Portfolio Manager's Desk
February 28 , 2010
By Steven R. Champion
After six quarters of negative YoY GDP growth, Taiwan’s 4
th quarter GDP grew by 9.22%, considerably in excess of forecasts. Taiwan’s economic recovery continues to benefit from rising demand in China.
Given the impact of Chinese New Year, which was in January in 2009 and in February in 2010, it is appropriate to combine both months in looking at export figures. In the first two months of the year, Taiwan’s exports grew 54.0% YOY but exports to China grew 103.8%.
The Taiwan government this month also loosened restrictions on investment in China by the LCD and semiconductor industries. Taiwan has agreed to allow a total of three investments in 6th generation or above technology as long as the investors have a Taiwan investment that is at least a generation ahead of the Chinese investment. This will allow the LCD industry to better compete with Korean companies operating in China.
The Au Optronics board has just approved a US$1.2 billion investment in a 7.5 Generation plant that will likely be in the Suzhou/Kunshan area. They are currently building an 8.5 Generation plant in Taiwan.
At this time, investment in panel fabs is not allowed. In the case of semiconductors, companies can now apply to invest in or build factories that are two generations less advanced than in Taiwan.
