March 20, 2019 / 9:14 AM / 6 months ago

UPDATE 1-Taiwan export orders fall most in nearly 3 years as tech slump drags on

* Feb orders fall 10.9 pct y/y vs -5.25 pct in Reuters poll

* Orders from China down 14.3 pct y/y; U.S. down 5.5 pct

* Ministry sees March orders down 6.8 pct to 9.2 pct

* Expects orders to recover in second half

TAIPEI, March 20 (Reuters) - Taiwan’s export orders fell the most in nearly three years in February as global demand for consumer electronics remained sluggish, pointing to a further slowdown in the export-reliant economy.

Orders in February fell 10.9 percent from a year earlier to $28.9 billion, their biggest drop since April 2016, Ministry of Economic Affairs data showed on Wednesday.

Demand contracted for the fourth month in a row and at a much sharper pace than the 5.25 percent median forecast in a Reuters poll.

January orders dropped 6.0 percent from a year earlier.

Taiwan’s hi-tech factories make it a leading indicator for global electronics demand, and the continued drop in orders suggests makers of smartphones and micro-chips are expecting sales to remain soft for some time longer.

Taiwan firms are major suppliers for global tech heavyweights such as Apple Inc and Qualcomm.

The ministry said the decline was also due to more cautious machinery orders from China as the U.S.-Sino trade dispute wears on.

Launches of new smartphone models and demand for new technology such as 5G, however, could support a “gradual monthly recovery” of orders for electronics, it said.

“We expect export orders to decline in the first half, while it has an opportunity to return to growth in the second half,” ministry official Lin Lee-jen said.

The ministry said it expects March export orders to decline by 6.8 to 9.2 percent from a year earlier.

Analysts at ANZ believe Taiwan may be facing a trade recession similar to 2014-15.

The prolonged downturn in global tech demand is likely to hit profits for the island’s many technology manufacturers this year. United Microelectronics Corp, Taiwan’s second-biggest contract chipmaker, said February sales fell about 12 percent on-year.

China’s cooling economy and a year-long trade war between China and the United States, Taiwan’s two biggest markets, have added to headaches for its exporters, disrupting regional supply chains.

The island’s central bank is expected to leave its key policy rate unchanged near record lows for the eleventh consecutive quarter on Thursday to keep monetary conditions accommodative.

Weaker demand was seen from nearly all of Taiwan’s major markets.

February orders from the United States fell 5.5 percent on-year, on top of January’s 5.3 percent decline.

Those from China dropped 14.3 percent, compared with a fall of 14.1 percent the previous month, while orders from Europe fell 18.8 percent. Japan gained 0.3 percent.

Jih Sun Securities economist Jordan Su said February’s orders were “a lot worse than expected”, pointing to a further slowdown in technology and machinery.

“It could have substantial impact on export-reliant economies in Asia.”

Taiwan’s government last month trimmed its 2019 economic growth forecast to 2.27 percent, citing growing uncertainties over global economic growth. (Reporting By Yimou Lee, Liang-sa Loh and Roger Tung; Editing by Kim Coghill)

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