(Bloomberg) -- Disappointing earnings may not be over for Taiwan companies, dragged by waning demand for Apple Inc.'s flagship iPhone and deteriorating relations between the island's two biggest trade partners.
Net income for companies on the Taiex index is expected to drop 9.2 percent on-year this quarter after undershooting estimates in the three months through September, the first miss since the second quarter of 2017, according to data compiled by Bloomberg.
In a market where semiconductor firms account for more than a quarter of the benchmark's weighting -- Taiwan Semiconductor Manufacturing Co. alone accounts for 21 percent -- the performance of tech giants like Apple can sway earnings. Suppliers including Hon Hai Precision Industry Co. saw disappointing profits after Apple reported stagnant iPhone sales and a worse-than-expected revenue forecast.
READ: Apple's Outlook Dims as Suppliers Worldwide Sound the Alarm
Sino-American tensions have continued to simmer. U.S. Vice President Mike Pence said during the weekend that the U.S. wasn't in a rush to end the trade war and would “not change course until China changes its ways.”
With trade frictions threatening to increase costs for manufacturers and consumers, and with economic growth slowing, earnings for Taiwan companies could slide in the coming quarters, said Richard Lin, vice president at Reliance Securities Investment Consultant Co. “We'll see the impact from the China-U.S. trade war gradually.”
Signs of a slowing economy have emerged of late, with the island's exports rising at a slower-than-expected pace in October. Several board members of the central bank saw the need to consider interest-rate adjustments so that Taiwan has sufficient flexibility in monetary policy in face of a future global economic slowdown, according to its meeting minutes released earlier this month.
READ: Taiwan Growth Slows as Trade Tensions Prompt Consumer Caution
Companies that missed estimates include
- TSMC's Sales Outlook Falls Short as Smartphone Demand Stalls
- Hon Hai's Profit Miss Reflects Growing iPhone-Supplier Woes
- Uni-President Third Quarter Net Income Misses Estimates
- Acer Third Quarter Net Income Misses Lowest Estimate
- TPK Holding Third Quarter Net Income Misses Lowest Estimate
- Chunghwa Telecom Third Quarter Net Income Misses Lowest Estimate
Companies that beat estimates include
- Quanta Third Quarter Net Income Beats Highest Estimate
- MediaTek Third Quarter Net Income Beats Highest Estimate
- Innolux Third Quarter Net Income Beats Highest Estimate
- AU Optronics Third Quarter Net Income Beats Highest Estimate
--With assistance from David Watkins.
To contact the reporter on this story: Yu-Huay Sun in Taipei at ysun7@bloomberg.net
To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Ron Harui, Kana Nishizawa
©2018 Bloomberg L.P.
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