1% rise in NTD reduces tech firm EPS by 1.5%: Business leader

Taipei, June 18 (CNA) A 1 percent appreciation of the Taiwan dollar against the U.S. dollar reduces earnings per share (EPS) for technology companies by 1.5 percent, Lin Por-fong (林伯豐), chairman of the Third Wednesday Association -- a group of prominent Taiwanese business leaders -- warned Wednesday.

At a regular meeting of the organization, Lin said the Taiwan dollar's appreciation against the U.S. dollar will cost all industries dearly as Taiwan is an export-oriented economy and a stronger currency is expected to lead to foreign exchange losses for local exporters.

In May, the Taiwan dollar surged by NT$2.088, or nearly 7 percent, against the U.S. dollar amid market speculation that the U.S. had pressured Taiwan to allow currency appreciation as part of ongoing trade and tariff negotiations between the two sides.

The central bank admitted it jumped into the market to shore up the U.S. dollar and prevent the Taiwan dollar from rising further, but denied Taiwan came under pressure from the U.S. for a stronger local currency.

In June, the appreciation of the Taiwan dollar has continued as tensions in the Middle East escalate. So far this month, the Taiwan dollar has gained an additional NT$1.31 percent to close at NT$29.542 on Wednesday.

Earlier this week, the local currency even hit NT$29.460 at one point, the highest in more than three years, before the central bank intervened, according to dealers.

"For tech companies, every 1 percent appreciation of the Taiwan dollar leads to a 1.5 percent drop in their EPS due to substantial foreign exchange losses," Lin said.

In the old economy sector, Lin singled out the machine tool industry, which already faces stiff competition from neighboring countries like Japan. A stronger currency further erodes their price competitiveness in international markets.

A higher Taiwan dollar has also resulted in a high level of forex losses in the financial sector, in particular for insurance firms, which hold a large amount of assets in foreign markets, Lin said.

Lin urged the government to stabilize the Taiwan dollar to maintain Taiwanese exporters' competitive edge on the global market.

His concerns echoed those of Taiwan's leading tech companies.

Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, has stated that every 1 percent appreciation in the local currency reduces its operating margin by 0.4 percentage points.

United Microelectronics Corp. (UMC), a smaller contract chipmaker, reported a similar impact, saying its gross margin drops by 0.4 percentage points under the same conditions.

Taiwan should prioritize its own interests when it faces the U.S. during tariff negotiations, while cutting its trade surplus with Washington, Lin said.

U.S. President Donald Trump first announced "reciprocal" tariffs on April 2 on countries with high trade surpluses with the United States. These included a 32 percent import duty on goods from Taiwan, though Trump announced a 90-day pause a week later to allow negotiations for a lower levy.

Taiwan's trade surplus with the U.S. rose from US$47.8 billion in 2023 to US$73.9 billion in 2024.