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Taiwan’s AI supply chain faces headwinds as export orders fall

Taiwan’s export orders fell for the 11th straight month in July, as booming demand for the island’s artificial intelligence (AI) supply chain continues to be eclipsed by macroeconomic factors including weak demand from China and high interest rates.

Taiwan’s export orders, a bellwether for worldwide technology demand, fell 12.0% from a year ago to $47.73 billion, the Ministry of Economic Affairs said on Monday.

The decline was slower than the 24.9% drop in June and beat the 16.5% fall predicted in a Reuters poll.

The ministry reiterated that persistently high inflation and rising interest rates, along with the global repercussions of the war between Russia and Ukraine, could continue to hinder economic growth in the months ahead.

“Export orders this month were better than expected. One of the reasons was the increase of information and telecommunications shipments boosted by severs for AI,” said Huang Yu-ling, director of the ministry’s statistics agency.

“There is still a busy season effect for the third quarter, which will be better than the second,” added Huang, referring to the second half of the year when demand picks up for the traditional end-of-year shopping season in Western markets.

Soft demand for Taiwan’s technology products amid global economic uncertainty prompted the government last week to forecast that its export-dependent economy will this year grow at its slowest pace in eight years.

Taiwanese firms such as Taiwan Semiconductor Manufacturing Co Ltd 2330.TW, TSM.N are major suppliers to Apple Inc AAPL.O, Nvidia NVDA.O and other global tech companies.

The ministry said it expected export orders in August to fall by between 10.2% and 13.9% from a year earlier.

July’s orders for telecommunications products fell 14.9% and electronic products fell 0.4% from a year earlier, the ministry said.

Taiwan’s July orders from China were 4.2% lower on year, narrowing from a 19.7% drop in the prior month.

Orders from the United States fell 18.6% from a year earlier, versus a 23.6% drop during the same period.

Orders from Europe fell 32.0% versus June’s 44.2% slump. Orders from Japan dropped 6.7% year-on-year. Reuters

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