Our comprehensive assessment of Taiwan's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Taiwan, as well as the latest industry developments that could impact Taiwan's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Taiwan before your competitors.

Country Risk

Taiwan Country Risk

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Core Views

  • Taiwan's economy contracted by 0.8% y-o-y in Q116, marking the third straight quarterly decline and extending the country's technical recession. Despite the transitory pick up in the Chinese economy, continued political uncertainty and a host of other domestic factors suggest that growth is unlikely to pick up until H216. With Q116 data coming in weaker than expected, we have downgraded our 2016 real GDP forecast slightly to 1.2% (from 1.5% previously).

  • With Taiwanese president-elect Tsai Ing-wen having yet to fully articulate her China policy, Beijing has attempted to influence the formulation of Taiwan's cross-Strait policy by alternating between promises of economic growth and diplomatic threats. However, these measures are unlikely to yield significant results as Tsai focuses on establishing her government ahead of her installation on...

Taiwan Operational Risk Coverage (9)

Taiwan Operational Risk

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BMI View: Taiwan's attractive operating environment presents few risks to incoming businesses. Among the limited concerns to investors is the significant underlying threat from the country's unstable relationship with China, which increases the risk of an armed conflict and has led to recent street protests. This dynamic also contributes to the most pertinent security risk to businesses, which is the threat of cyber attacks. In addition, high labour costs and a heavily state-owned banking system reduce Taiwan's international competitiveness and drive up operational costs. Nevertheless, the country performs well in a number of other areas, most notably its highly developed logistics network and open economy, with relatively low tax rates and minimal red tape. These factors largely outweigh the risks posed to business activity and consequently Taiwan receives a score of...

Taiwan Crime & Security

BMI View:

BMI View: Taiwan's secure operating environment, in which workers and businesses enjoy a low risk of being targeted by violent criminal activity or terrorism, is a major draw for foreign investors. Already low crime rates are continuing to fall and the lack of any marginalised minority groups, combined with Taiwan's limited appeal to international extremist organisations, means that terrorism is almost non-existent. While improving bilateral relations with China do not prohibit military invasion, the threat is mitigated by economic integration and military protection offered by the US. Businesses and investors should take note of T...

Taiwan Labour Market

BMI View:

BMI View: Taiwan boasts a large, highly skilled and urbanised labour force which is generally suitable for meeting the recruitment needs of businesses. Investors can expect a labour pool comprising a diverse range of highly skilled workers, and will benefit from flexible labour regulations, competitive employment costs and minimal unionisation. Nevertheless, Taiwan is facing a wholesale demographic shift which is resulting in a shrinking labour force and greater upward pressure on wages - factors which will reduce the county's appeal over the longer term. At present, Taiwan's attractive...

Taiwan Logistics

BMI View:

BMI View: Overall, there are very few risks posed by Taiwan's transport network to potential investors, making the country an attractive investment destination. Well located on key east-to-west trading routes, Taiwan has an extensive road and rail system, ensuring access to all parts of the island, as well as extensive shipping and air freight capacity, ensuring imports and exports are quick and cost-effective. Driven by particularly high scores for costs, connectivity and quality of transport, Taiwan has a BMI Logistics Risk Index score of...

Taiwan Trade & Investment

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Trade and investment risks are low in Taiwan owing to the country's open economy, relatively low fiscal and trade barriers and minimal red tape plaguing its bureaucracy. As a result, despite a dip during the global financial crisis, foreign investment outflow is recovering, a trend we expect to continue in the foreseeable future. That said, the country's heavily state-owned banking system reduces international competitiveness, though it is gradually privatising. For these reasons, the country receives an overall score of 68.8 out of 100 for Trade And Investment Risk, putting it in 6th position out of 29 countries in Asia.

Foreign trade has driven Taiwan's rapid economic growth over the past 40 years, and Foreign Direct Investment (FDI) accounts for 12.5% of GDP. However, following the beginning of the global financial crisis in 2008 FDI did fall in Taiwan, though there are strong signs that it is recovering to pre-crisis levels: exports rose...

Taiwan Industry Coverage (28)

Autos

Taiwan Autos

BMI View:

BMI View: An aging population coupled with external headwinds in the form of a slowing Chinese economy will dampen total vehicle sales growth with passenger vehicle sales forecast to contract 1.2% in 2016.

Passenger Vehicle Sales Dampen Total Vehicle Sales
Total Vehicle Sales And Passenger Vehicle Sales growth
f = BMI forecast. Source: TTVMA,BMI

Key Views

  • Slowdown in exports to China will hinder total vehicle sales.

  • Infrastructure...

Commercial Banking

Taiwan Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Consumer Electronics

Taiwan Consumer Electronics

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BMI View: Taiwan is a mature devices market with high penetration in most device categories, including smartphones and tablets, and consequently its growth potential is smaller than those of emerging markets in the region. However, the medium-term forecast, with a CAGR of 3.5% over 2016-2020, is an improvement over 2014-2015 with the economy expected to strengthen, while product trends in the computer hardware and AV segments turn positive. We identify the most prominent opportunity as premium device sales - ie flagship smartphones and tablets, hybrid notebooks and Ultra-HD TV sets - based on our analysis of household income...

Defence & Security

Taiwan Defence & Security

BMI View:

BMI View: With President-elect Tsai Ing-wen's independence-leaning administration taking office in May 2016, relations with mainland China have cooled. In comparison to China's People's Liberation Army, Taiwan's military is small in size, and lacks technologically advanced equipment. Compounded by our view that the US is increasingly unlikely to come to Taiwan's aid in the event of military conflict with the mainland, domestic demand for modern equipment is significant and rising, particularly for products such as advanced multi-role combat aircraft, submarines and air defence systems. Taiwan's armed forces are being restructured and professionalised, which eventually will mean that a greater share of the defence budget can be directed towards R&D and new procurement, rather than personnel costs. The...

Food & Drink

Taiwan Food & Drink

BMI View:

BMI View: We forecast positive growth for Taiwan's food and drink industry in 2016, primarily led by the MGR and drink industry. The strong competiveness in the country's MGR sector will boost sales as hypermarkets as well as convenience stores benefit from increased consumer spending. Taiwan's whiskey industry will boast from increased growth in 2016 as demand increases due to rising western culture. The food industry will grow modestly in the same period as food regulator FDA looks to tighten food standards on imported products.

Headline Industry Data

  • Food consumption (local currency) growth (y-o-y) in 2015: 2.2% compound annual growth rate (CAGR) 2014 to 2019 (local currency): +2.8%.

  • Per capita food consumption (local currency) growth (y-o-y) in 2015: 2.0...

Freight Transport

Taiwan Freight Transport

BMI View:

BMI View: Taiwan's freight transport sector will continue to be affected by the slowdown in the Chinese economy in 2016. Taiwanese exports will feel the headwinds from China as well as the relative strength of the TWD compared to the KRW. Air freight will continue its growth on a more moderate level over the short term, before picking up slightly in 2017/2018, while road and rail will both grow at a faster rate over the medium term.

Taiwan's economy contracted by 1.0% in Q315 compared to the 0.5% expansion registered in the previous quarter. Ongoing weakness in the Chinese economy amid increasing uncertainty in the domestic political situation will continue to weight on Taiwan's economic growth. As such, we have downgraded our 2015 and 2016 real GDP forecasts to 1.0% and 1.9% respectively. GDP growth for 2016 was previously...

Infrastructure

Taiwan Infrastructure

BMI View:

BMI View: We expect growth in Taiwan's construction sector to pick up beyond 2015, supported by expansionary spending policies, a focus on developing the country's transport network and a rebalancing of the power sector. The presidential elections in 2016 pose the most significant downside risk to our outlook.

Forecast And Latest Updates

  • Taiwan's construction industry contracted 1% y-o-y in 2015. We forecast the industry to return to growth and register 1.3% y-o-y expansion in 2016, supported by expansionary expenditure and monetary policies.

  • We hold our view Taiwan's export-orientated manufacturing sector will continue to face headwinds due to the ongoing slowdown in China and reduced global demand for tech products. These factors will weigh on the non-residential buildings segment...

Insurance

Taiwan Insurance

BMI View:

BMI View : As of early 2016, we have revised down slightly our forecasts for premiums for both the life and the non-life segments, in order to recognise the slightly less favourable economic prospects for Greater China and the rest of the Asia-Pacific region over the coming years. Nevertheless, the life insurers - who represent a key conduit for organised savings - should continue to enjoy growth in premiums of 5-6% annually through the forecast period. Non-life insurance premiums are expected to increase at a similar pace. Demographic trends mean that health insurance should remain something of a growth hotspot.

Headline Insurance Forecasts (Taiwan 2013-2020)
2013 ...

Medical Devices

Taiwan Medical Devices

BMI View:

BMI View: The ongoing conflict of interest between the multinational industry and the government is understandable; despite constraints and barriers to market entry, Taiwan remains a lucrative market, among the top 25 in the world in value terms, and over 75% of the market is still supplied by imports.

Projected Medical Device Market, 2014-2019
Total (USDmn) Per Capita (USD) Total (Local Currency mn) Per Capita (Local Currency) Exchange Rate...

Metals

Taiwan Metals

BMI View:

BMI View: We have increased our 2016 tin price forecast to USD16,500/tonne owing to a stabilisation in the Chinese economy over Q116 that has boosted all industrial metal prices significantly over January-April. While we expect consolidation over the remainder of 2016, tin prices will continue to recover beyond 2016 as the global market posts sustained market deficits and inventories dwindle.

Global - Tin Supply, Demand & Price Forecasts
2014 2015e 2016f ...

Taiwan Metals

BMI View:

BMI view: We have revised our aluminium price forecast from USD1,575/tonne to USD1,600/tonne in 2016, as the tightening market provided an earlier than expected floor in Q116. Aluminium prices will gradually edge higher as the global market moves into a deficit by 2018.

...
Global - Aluminium Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

Taiwan Metals

BMI View:

BMI View: Despite the strong H116 iron ore price rally, prices will edge lower due to weakening Chinese consumption over the latter half of 2016. From 2017 onwards, iron ore prices will remain subdued as iron ore prices remain under pressure from an over-supplied seaborne market, driven by strong production growth in Australia and Brazil, and weak consumption growth in China.

...
Global - Iron Ore Production Forecasts
2013 2014 2015e 2016f

Taiwan Metals

BMI View:

BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.

...
Global Nickel Forecasts
2013 2014 2015e

Taiwan Metals

BMI View:

BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.

Global - Copper Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f ...

Taiwan Metals

BMI View:

BMI View: We have raised our gold price forecast for 2016 to USD1,275/oz and have a new five-year price target of USD1,400/oz. We have turned more positive towards prices due to rising inflation pressures and our view that real rates will remain depressed in developed markets beyond 2016. A modest rise in prices will be insufficient to reverse the trend of weak mine investment and industry consolidation.

BMI Gold Forecasts
2014 2015 2016f ...

Taiwan Metals

BMI View:

BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.

Steel Price Forecast
2014 2015 2016f 2017f 2018f 2019f...

Taiwan Metals

BMI View:

BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.

...
Global - Zinc Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f

Taiwan Metals

BMI View:

BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.

...
BMI Lead Price Forecast
Current* 2016f 2017f 2018f 2019f 2020f

Oil & Gas

Taiwan Oil & Gas

BMI View:

BMI View: Despite a lower oil price environment, rising energy efficiency and import constraints will prevent weaker prices from increasing oil and gas consumption. We also note Taiwan's shares in the regional refined fuels exports market will come under growing competition from refining capacity expansions in the region's emerging economies, which will moderate their need for imports in the medium to long term.

Headline Forecasts (Taiwan 2013-2019)
2013 2014e ...

Petrochemicals

Taiwan Petrochemicals

BMI View:

There is a worrying trend for Taiwanese petrochemicals producers to move investment in basic chemicals to mainland China and South East Asia. Unless Taiwan can diversify and specialise to add value to the olefins production it currently possesses, the industry is likely to fall behind and lose its competitive edge.

The Taiwanese petrochemicals industry's recovery in 2015 began to tail off as the industry was affected by the slowdown in China. In the first 10 months of 2015, the chemicals products index grew 0.4% y-o-y and rubber grew 0.6%, but plastic declined 3.7% with the sector reversing the gains it made in the previous year. The trend reflected a 0.6% decline in manufacturing, caused by falling orders from mainland China as well as the effects of water restrictions for producers in response to the drought situation.

Taiwan's reliance on naphtha streams, derived from refining imported crude, puts it...

Pharmaceuticals & Healthcare

Taiwan Pharmaceuticals & Healthcare

BMI View:

BMI View: The potential the Taiwanese pharmaceutical sector holds for overall economic growth will see continued investment by the government to support local drugmakers. This will gain in importance as commercial opportunities in China's healthcare sector remain less affected by the overall slowdown in the economy. In addition, Taiwan's biomedical institutes and partnerships with multinational pharmaceutical firms will support domestic drugmakers in moving outward and up the value chain.

Headline Expenditure Projections

  • Pharmaceuticals: TWD167.7bn (USD5.5bn) in 2014 to TWD175.1bn (USD5.5bn) in 2015; +4.4% in local currency terms and -0.1% in US dollar terms.

  • ...

Power

Taiwan Power

BMI View:

BMI View: Heavily dependent on imports, Taiwan's power market is dominated by thermal sources, with coal, gas, and to a lesser extent, oil-fired power stations generating the majority of energy used. While Taiwan's fourth nuclear plant is almost operationally ready, growing public distrust threatens to stall the start up of this facility, even as the first two nuclear plants age and need to undergo maintenance. Moreover, political and economic pressures have restricted Taipower, the state utility from raising tariffs, leaving the company stuck in the red. Despite the Taiwan government's ambitious renewable energy goals to 2025, slow progress suggests renewables are unlikely to reach the target ...

Real Estate

Taiwan Real Estate

BMI View:

BMI View: Taiwan's economy is becoming less export focused, with domestic demand an increasingly important driver of the commercial real estate market. The premium end of the office and retail market will continue to show strength, driven by Taipei's status as a regional financial hub and its booming retail industry, while the industrial real estate segment will continue to rebalance away from traditional manufacturing and export space to more modern facilities designed for the country's growing high-tech manufacturing and export sectors.

We forecast slow but steady economic growth in Taiwan over our forecast period to 2019, with real GDP increasing by 3.5% in 2015, rising to 4.1% in 2016 and falling to 3.8% in 2018 and 2019. Stronger growth will be held back by the weakness in the Chinese economy, as Taiwan is a key trade and investment partner. But in an environment of...

Renewables

Taiwan Renewables

BMI View:

BMI View: Despite ambitious targets, expansion in Taiwan's non-hydro renewables sector will remain below-potential primarily due to the country's unstable regulatory environment and low liberalisation levels in the power sector. Considering the Taiwanese government's focus on offshore wind power and the significant solar panel manufacturing base in the country, we do expect growth to pick up marginally across these segments over out 10-year forecast period. That said, non-hydro renewables contribution to Taiwan's total power generation mix will remain below 4%.

Renewables...

Shipping

Taiwan Shipping

BMI View:

BMI View: We anticipate Taiwan's main ports to register steady year-on-year (y-o-y) growth in 2016 with the port of Keelung leading the way in annual growth terms (3.1% and 3.5% for tonnage and container gains). We have downgraded our 2015 and 2016 real GDP forecasts to 1.0% and 1.9% (respectively) from 1.7% and 2.5% previously, to reflect the impact of the decline in export growth, as well as increased political uncertainty in the country.

Taiwan's economy contracted by 1.0% y-o-y in Q3 2015 compared to the 0.5% expansion registered in the previous quarter. In seasonally adjusted annualised quarter-on-quarter (q-o-q) terms, the...

Telecommunications

Taiwan Telecommunications

BMI View:

BMI View : As aggressive bidding for spare 4G spectrum gathered momentum in late 2015, it became clear that there is a surfeit of competition in Taiwan's saturated mobile market. Pressure for operators to consolidate will intensify in 2016, but regulatory resistance is expected; this would be damaging to an industry that needs to address mounting debt ahead of the adoption of 5G early in the next decade and growing demand for 'everything everywhere' services and solutions.

4G Supplanting 2G And 3G Networks
Taiwan Mobile Forecasts
...

Tourism

Taiwan Tourism

BMI View:

BMI View: Taiwan's tourism market is growing rapidly, bolstered by growing arrivals from major market China and increasing regional and global air travel connections. The domestic tourism market is well-established and along with growing numbers of international visitors this supports healthy occupancy rates and significant levels of tourism related spending. As the investment environment continues to improve, we expect to see further development in the hotel sector, particularly in terms of the quality mid-range and luxury hotel sectors.

Key Forecasts (Taiwan 2012-2019)
Indicator 2012e ...

Water

Taiwan Water

BMI View:

BMI View: Given that the government will be a key driver of infrastructure project implementation as well as financing over the coming years, the uncertain political outlook for Taiwan in light of the presidential elections coming up in 2016 is a key risk to our outlook for the current infrastructure improvements in the pipeline for the water sector. Moreover, neither the ruling Kuomintang party nor the opposition Democratic Progressive Party has a concrete China policy which poses particularly significant risks with regards to potential China water imports. Although agreements have now been signed, any change to pro-China political sentiment could result in the delay or even cancellation of the proposed pipeline, and this is a significant downside risk to our water consumption outlook.

...
Water Forecast Highlights

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