July 22, 2019 / 9:50 AM / in 5 months

UPDATE 1-Taiwan June export orders fall for 8th month as China demand tumbles

* Buyers cautious amid weak global demand, trade war

* June orders -4.5% y/y vs -0.83% in Reuters poll

* Orders from China drop 14.6% y/y; U.S. up 6.8%

* Ministry sees July orders falling 6.7-9.1% y/y

* Orders could recover in H2, ministry says

TAIPEI, July 22 (Reuters) - Taiwan's export orders contracted for an eighth straight month in June, with global companies increasingly hesitant to make new investments in machinery as the China-U.S. trade war wears on.

Monday's data showed a sharper drop in orders from China and Japan than the previous month, and a contraction from Europe, though U.S. demand for Taiwan products rose for the first time in months, possibly due to supply chain adjustments.

Combined with a sharp drop in South Korea's preliminary exports reported earlier in the day, the readings point to further strains on Asia's trade-reliant economies in coming months, especially those which are highly reliant on sales of hi-tech electronics and memory chips.

Orders in June dropped 4.5% from a year earlier to $38.5 billion, data from Taiwan's Ministry of Economic Affairs showed.

That badly lagged a forecast of a 0.83% decline in a Reuters poll of analysts, but was a slight moderation from a 5.8% drop in May.

The ministry expects July export orders to decline 6.7-9.1% on-year.

"Affected by the U.S.-China trade spat, the global economy is softening and clients give their orders with a conservative and hesitant approach," the ministry said in a statement.

International orders for machinery saw the largest drop, slumping 22.3%, while electronics fell 4.3%, though telecom products rose.

However, the ministry said orders could improve in the second half, thanks to rising demand for the fifth-generation telecommunications (5G) technology and as retailers prepare for the peak year-end shopping season, when major smartphone vendors are set to launch new products.

Taiwan's hi-tech factories are major suppliers for global tech heavyweights such as Apple Inc and Qualcomm , and the continued drop in orders suggests global electronics could remain soft for some time.

SUPPLY CHAIN RELOCATION

Slowing global technology demand, the trade war and U.S. restrictions on Chinese tech giants are taking a growing toll on Asia and its marquee manufacturers.

Chipmaker TSMC on Thursday posted a quarterly profit drop due to sluggish demand, but it gave an upbeat forecast for the coming months thanks to expected robust demand for 5G chips.

"The worse-than-expected orders in June were due to the beginning of the worsening U.S.-China trade spat in May," said Jih Sun Securities economist Jordan Su.

But Su added that orders could return to growth in September-October if recently-resumed trade talks between the two sides show signs of progress.

Taiwan's actual exports surprised by returning to growth in June, which the government attributed to Taiwan manufacturers moving parts of their supply chains back to the island as the Sino-U.S. trade dispute escalated.

June orders from the United States rose 6.8% on-year, compared to May's 2% decline.

But demand from Taiwan's other key markets deteriorated.

Orders from China dropped 14.6%, compared with a fall of 13.9% the previous month, while orders from European buyers slipped 5.3%. Japan orders declined 7.9%.

South Korea earlier on Monday reported its semiconductor exports tumbled 30.2% in the first 20 days on July from a year earlier. Overall exports were down 13.6%.

Samsung Electronics Co Ltd forecast in early July a steep plunge in second-quarter operating profit.

A growing dispute between Tokyo and Seoul over Japanese curbs on exports of some raw materials to Korea is threatening to further disrupt the global tech sector. (Reporting By Yimou Lee, Liang-sa Loh and Roger Tung; Editing by Kim Coghill)

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