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Depreciation on Korean Won may hurt Taiwan manufacturers
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Wednesday, June 2, 2010
Currency depreciation may become a key factor in the competition between Taiwanese high-tech firms and their South Korean rivals as local analysts speculate on whether tension on the Korean Peninsula will lead to extra orders.
"If the tension between North and South Korea does not worsen, but the Korean won depreciates, then South Korean companies could capitalize on the depreciation to lower their prices, " Tony Huang, a senior analyst with DIGITIMES Research, told Central News Agency on Wednesday.
"This would deal a blow to Taiwanese firms," he said.
But he added that this situation will not occur if the South Korean currency only falls for a short period.
Local liquid crystal display (LCD) and dynamic random access memory (DRAM) companies said that short-term changes in the currency exchange rate have yet to generate much impact on them, the Economic Daily News, a local Chinese-language newspaper, reported Wednesday.
The South Korean currency closed at 1,253 won against the U.S. dollar Wednesday, slightly down from 1,250 won a day earlier. The won plunged by 2.84 percent Tuesday, while the New Taiwan dollar depreciated by 0.65 percent.
The Taiwan dollar was up NT$0.04 Wednesday.
Taiwanese companies were concerned about a repeat of last year, when South Korean companies used a huge won depreciation to expand market share.
Cheng Cheng-mount, Citigroup Taiwan's chief economist, agreed with Huang, predicting that market uncertainties would be short-term and that the recent political crisis between North and South Korea would not last long.
DRAMeXchange, a research institute, and some experts have suggested Taiwanese companies could see their market share and revenues grow if the tensions worsen.
Huang, however, said that if full-scale war breaks out between South and North Korea and affects DRAM products supplies, Taiwanese companies will not be able to take over South Korean firms' production capabilities. The local LCD panel industry wouldn't see drastic growth either, he said, because LCD panel firms' capacity utilization rate has already reached 88 percent.
Even if companies worry about a lack of LCD panels during the third quarter and seek to store LCD panels by buying them from Taiwan, Taiwanese companies can only offer a limited supply, he said.
South Korea shares 48 percent of the global large-size LCD panel market and more than 50 percent of the global DRAM market.
The head of Taiwan's top economic planning body said Wednesday that it will "take months" to see whether Taiwan benefits from heightened tensions on the Korean peninsula.
"Unless a war starts and looks like it will not end in the short term, the next round of orders will go to other countries, " Council for Economic Planning and Development (CEPD) Chairwoman Christina Liu said when fielding questions in the legislature.
"It is not something you can expect to happen right away, " she added.
By: DocMemory
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