Alexa
  • Directory of Taiwan

Weaker Taiwan dollar to benefit wafer foundries

Weaker Taiwan dollar to benefit wafer foundries

Taipei, Jan. 3 (CNA) Taiwanese wafer foundries are expected to see their profitability rise on the rapid depreciation of the Taiwan dollar against the U.S. dollar over recent months. As major operators, Taiwan Semiconductor Manufacturing Co. (TSMC) and rival Microelectronics Corp. (UMC) could become the beneficiaries of such a trend, with analysts pointing to the fourth quarter of last year as a particularly bright spot. TSMC and UMC, the top two contract chip makers in Taiwan, are expected to see their gross margins improve about 0.4 percentage points per each 0.1 percent the Taiwan dollar depreciates against the greenback. TSMC is the world's largest pure foundry operator. For the entire year of 2014, the Taiwan dollar fell about 5.84 percent against the U.S. dollar to close at NT$31.718 on Dec. 31. Amid currency depreciation competition in the region, the local central bank intensified its efforts to prop up the U.S. dollar, particularly in December, leaving the Taiwan dollar to fall 4.21 percent against the greenback in the fourth quarter. That far outpaces TSMC's early forecast of an about 1 percent fall. In the third quarter, the Taiwan dollar saw a 1.74 percent decline. In addition to the local central bank's intervention, hopes of a stronger U.S. dollar after the U.S. Federal Reserve's end to its six-year quantitative easing program has further lifted the greenback. Analysts said that the fall in the Taiwan dollar has made Taiwan-made chips cheaper, and to make things even better, TSMC and UMC are expected to rake in handsome foreign exchange gains in the fourth quarter. The chip sector is not the only industry which has long hoped that the Taiwan dollar would fall further to strengthen its bottom line. Chairman of the Taiwan Association of Machinery Industry Hsu Hsiu-tsang said that he hopes that the local currency should fall further to test the NT$32.50 mark so that Taiwanese businesses can play catch-up with the heavy losses incurred by other regional currencies, in particular the Japanese yen and the South Koran won. Machine tool makers have expected that whenever the for every NT$1 the Taiwan dollar depreciates against the U.S. dollar, their gross margin could rise 1 percentage points, leaving some able to post about NT$40 million in foreign exchange gains. Despite the positive outlook, Yang Te-hwa, chairman of Goodway Machine Corp., said that he has fears the yen will continue to fall against the U.S. dollar to trigger another round in the regional currency depreciation war, threatening Taiwanese machine tool exporters. In December, the yen fell below the 120 yen mark against the U.S. dollar at one point amid expectations that the Bank of Japan will keep pumping funds into the market to further weaken its currency. (By Jackson Chang, Jalen Chung and Frances Huang)


Updated : 2021-09-20 13:13 GMT+08:00