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September 21, 2017

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Rising Taiwan currency could hurt electronics-parts makers

TAIPEI--A rising Taiwan dollar is likely to impact the bottom lines of local electronics-component makers, although the local central bank has stepped up its efforts to cap the gains posted by the local currency, analysts said Saturday.

Since the end of the third quarter of last year, the New Taiwan dollar has risen about NT$0.282, or 0.96 percent against the U.S dollar. Without the central bank's intervention, the local currency could have breached the NT$29.00 mark.

The latest closing level of the New Taiwan dollar was NT$29.060 against the greenback on the local foreign exchange market Friday.

The strength of the New Taiwan dollar is largely due to the massive inflows of foreign funds after major central banks around the world, such as the United States Federal Reserve and the Bank of Japan, raised liquidity levels greatly to boost the economy.

Advanced Semiconductor Engineering Inc. (ASE), one of Taiwan's leading integrated circuit packaging and testing-service providers, is expected to suffer a 0.1-percentage-point decline in its gross margin with each NT$0.1 rise in the New Taiwan dollar against the U.S. dollar, analysts said.

In fact, the pinch of the impact from a stronger New Taiwan dollar was felt by ASE as early as the fourth quarter of last year, when sales generated from its material supply operations rose only 1.5 percent from a quarter earlier, in New Taiwan dollar terms, while sequential revenue growth in U.S. dollar terms stood at 4 percent.

Rival Siliconware Precision Industries Co. is likely to see its gross margin fall by about 0.2 percentage points whenever the New Taiwan dollar gains NT$0.1 against the greenback, analysts said.

They said Siliconware's sales had been affected by the strength of the New Taiwan dollar as early as December last year, and the impact would grow if such unfavorable circumstances continued.

Chipbond Technology Corp., a driver IC packaging and testing-service provider, is also sensitive to the fluctuations of the New Taiwan dollar, while Nan Ya Printed Circuit Board Corp. has been feeling the pressure from a rising New Taiwan dollar as its accounts receivable are denominated partly in the U.S. dollar, analysts said.

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