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Value Added Has Fallen For Two Consecutive Years in Taiwanese Manufacturing

By Chen Nianshun
Published: Jan 07,2020

TAIPEI, Taiwan - According to the findings of a study conducted by the Chung-Hua Institution for Economic Research, since December 2018, the proportion of Taiwanese manufacturers affected by Sino-U.S. Trade disputes has yet to experience a significant increase.

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At the same time, approximately 66.2% of the manufacturers interviewed have response measures in place or plans to implement them. These response measures include evaluating manufacturers who transfer orders to Taiwan through existing production lines. Furthermore, the top three product types for transfer orders are high-value or customized products (69.4%), OEM standardized mass-produced products (47.2%), and automated systems (16.7%).

It is also worth mentioning that according to an analysis of the latest statistical reports released by the Department of Statistics, Ministry of Economic Affairs (MOEA), due to the impact of raw material price fluctuations, and coinciding with low international oil prices in 2016, the costs which manufacturers have invested in raw materials has shrunk, causing the manufacturing value added rate for the capacity to represent the added value created per unit of product produced to reach its second-highest level in 2016 of 30.1%. Following that, due to a rebound in oil prices from their lowest level coupled with weakening global demand resulting from the US-China trade war, there was a slight decline of 29.8% and 29.1% for two consecutive years from 2017 to 2018 respectively.

Although compared to other major countries, the value-added ratio of manufacturing in various countries has also generally declined, the United States, Japan and Germany, which attach greater importance to research and development and brand advantages, have still maintained value-added rates of more than 30%. Furthermore, with their main rival, South Korea, having reached 28%, Taiwan could be overtaken at any time.

MOEA also stated that in the future Taiwan will only be able to experience yearly growth by taking advantage of the return of investment in manufacturing research and development funds and encouraging smart manufacturing to promote industrial upgrading and transformation; moreover, the added value rate is expected to cease falling and rise again.

(TR/ Phil Sweeney)

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