Taiwan IT manufacturers hit by price free fall

Taiwan's IT product manufacturing sector is feeling the heat from the accelerating fall in hardware prices, officials at the market research unit of the island's government-backed Institute for Information Industry said here this week.

Although Taiwanese manufacturers are shipping higher volumes of many products -- from desktop and notebook PCs to CD-ROM drives and keyboards -- they are experiencing much slower growth in sales revenues, according to Market Intelligence Centre (MIC) officials.

For some product categories, such as monitors, scanners and keyboards, the rapid price drops have meant that Taiwan-based manufacturers this year shipped bigger volumes for smaller revenues than in 1997.

The total value of IT hardware products manufactured by Taiwan-based organisations this year is expected to achieve its slowest growth rate in recent years to reach $US33.6 billion, an increase of 11.4 per cent from last year's $US30.2 billion, according to preliminary MIC estimates.

Although still healthy, the growth rate is down by almost half from last year's 20.5 per cent, and significantly lower that the 28.1 per cent and 34 per cent increases posted in 1996 and 1995, respectively, the report said.

To offset higher labour costs, manufacturers continue to move production out of Taiwan, mainly to neighbouring China and countries in Southeast Asia, officials said. MIC now predicts domestic production value to grow by a mere 1 per cent this year to reach $US19.2 billion -- just enough to let Taiwan retain its position as the world's third largest manufacturer of IT products, behind only the US and Japan.

If the trend towards lower prices continues unabated, due in large part to the popularity of sub-$1000 PCs, Taiwan might next year even see the domestic production value shrink slightly, the officials said.

Singapore, where a large portion of the world's hard drives are manufactured, is nipping at Taiwan's heels. The city-state this year is expected to post a 5 per cent increase in production value to $US18.7 billion.