Technology: The Asian tigers meow

GlobalPost
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The World

SAN FRANCISCO — Do tigers meow? It looks that way in Asia, where former economic powers are struggling mightily.

Like a rock tossed in a pond, the U.S. and European financial crisis has rippled through the global economy. It's now affecting almost every industry, including technology in Asia — a critical part of the economic landscape there.

Demand for Asian exports has dried up as Western consumers and businesses cut spending. Export declines have afflicted the so-called Asian tiger nations, though to varying degrees. Japan and Taiwan have suffered the greatest shocks. South Korea, Singapore and Hong Kong have also been hit. India’s plans for tech expansion have lost momentum. And China is doing everything possible to sustain its growth despite the slump.

The tech sector is just one element in the overall export pullback, of course. But this brief snapshot shows just how deeply the crisis is affecting the key tech-producing nations of Asia:

Japan

The world's second-largest economy is the poster child for Asian distress. From 2001 to 2007, it had enjoyed its longest post-World War II expansion. But in 2008 slowing exports led to a series of contractions in its GDP. Japan’s 12.7 percent annualized drop in fourth quarter GDP was called its “worst result since the first oil crisis of 1974.” Plummeting demand for autos and other industrial goods were the main culprit, but a reported 60 percent December drop in audio-equipment exports to the United States fueled losses and layoffs at Japanese electronics firms. Among the damage revealed so far, Panasonic has said it would cut 15,000 jobs; NEC will reduce by 20,000; Sony is shedding 16,000 workers and Hitachi another 7,000.

Taiwan

Taiwan has also been hit hard by the global downturn, suffering a reported 8.36 percent annualized drop in 4th quarter GDP in 2008. Its exports are predicted to decline 20 percent in 2009 versus 3.64 percent growth in 2008. Taiwan is more dependent on tech exports than is Japan, with a contract manufacturing industry that builds the circuitry for name-brand products designed by Western firms. The market research firm iSuppli reports that global electronics contract manufacturing, Taiwan’s bread and butter, is expected to drop 9.9 percent in 2009. Such declines have already caused Taiwanese firms like Asustek, the world’s largest supplier of computer circuit boards, to report its first-ever quarterly loss.

South Korea

South Korea has felt the global slowdown to a milder extent thus far. In South Korea’s case a record 32.8 percent drop in January 2009 exports have fueled reports that its economy, not yet officially in recession, may be headed into its first such slump since the Asian financial crisis of 1997-98. Like Japan, South Korea’s exports include heavy industrials like autos and steel. But as evidence of the malaise in its tech sector Samsung Electronics, the world’s top memory chipmaker, recently reported its first quarterly loss.

Singapore

Singapore’s fortunes are also sliding. Government authorities report a sharp contraction in 4th quarter 2008 GDP and expect recession throughout 2009 as the city-state’s tech-oriented manufacturing and services exports both contract.

India

The worldwide slump has blunted India’s outsourcing industry and put other tech development plan on hold. India’s outsourcing partners have included many Western financial services firms that are directly in the path of this crisis. No one expects outsourcing to cease, but India faces increased competition for a pie that grows more slowly. The Philippines is going after the English-speaking market and Eastern European nations are catering to the rest of Europe. Revelations of fraud in what had been one of India’s top outsourcing firms have tarnished its halo (See GlobalPost coverage of Satyam Computer Services here). Meanwhile, India’s bid to develop a semiconductor manufacturing capability are fading as falling demand for chips and the cost of financing make this the wrong time for a newcomer to build expensive fabrication plants.

China/Hong Kong

Hong Kong, one of the original Asian tiger economies as a British colony, remains tied to the Western business cycle even under Chinese rule, and its economy is reported to be in the midst of a year-long contraction.

China, meanwhile, struggles to maintain export-driven growth rates that remain the envy of the world, yet barely meet the demands of its increasingly college-educated and urbanizing populace. Foreign observers say its GDP grew 6.8 percent in the 4th quarter of 2008, down from 9 percent in the previous quarter and 13 percent for all of 2007. That deceleration has prompted Chinese authorities to announce a $586 billion stimulus package, equivalent to a reported 15 percent of its GDP, in a bid to reduce double-digit urban unemployment and avert feared civil unrest.

Technology is just one element in China’s vast economy and modernization plans. But its central planners continue to promote initiatives like the free trade zone in Tianjin, a coastal city southeast of Beijing. There, in what has been dubbed China’s Silicon Valley, they envision a manufacturing cluster for nanotechnology, biotechnology and other advanced industries. Even as the global recession creates economic shock waves, China continues to invest in its advanced technology base.

For more on the global economic crisis:Click here for the full report

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