Shockwaves and worry in Taiwan

HSINCHU SCIENCE PARK, Taiwan — As dusk falls in this soulless technology park an hour southwest of Taipei, a young woman waits for her husband to pick her up with his scooter. And she worries.

The 30-year-old is a technician for Taiwan Semiconductor Manufacturing Company. By the island’s standards, she is lucky — TSMC is one the top technology firms here.

But since December she’s been forced to take five days per month of unpaid leave, slashing her salary by a quarter. She has two kids at home, and worries things could get worse. "I’m afraid I could get laid off."

Here in Taiwan’s own Silicon Valley, technology workers wait anxiously, and wonder when Americans halfway around the globe will go back to their gadget-buying ways.

After decades of economic growth — and stunning business success as Taiwan became a central player in the global technology industry — the shockwaves from the U.S. economic crisis are being felt even in this distant park, at the center of Taiwain’s once-booming economy.

Until Americans do start buying again, the catchphrase here at Hsinchu is "wuxinjia" — unpaid vacation. Since late last year, bosses have ordered workers here to take anywhere from three to eight days off per month.

The strategy is a way to stay lean in tough times, without resorting to layoffs. But in an age of globalized supply chains and interconnected economies, wuxinjia is also a painful reminder of how problems in the U.S. can whiplash out, touching lives far beyond American shores.

Taiwan’s banks were mostly spared a financial crisis because they had little exposure to bad U.S. debt.

Instead, it’s the drop in consumer spending in the U.S., Japan and European markets that has hammered Asia’s export economies. Exports plunged 29 percent in Taiwan last month, 25 percent in China, 24 percent in Singapore and 18 percent in South Korea.

Cargo ships lay idle in Philippine ports, and in Malaysia, the electronics maker Flextronics recently announced it will lay off some 1,400 workers.

For Taiwan, this technology park is the epicenter of the downturn. Here, firms that Americans have never heard of churn out many of the computer chips, flat-panels and technology components for the gadgets on U.S. retail shelves.

The park sprawls out over a huge plot of land. Even with fewer workers showing up every morning, thousands of middle- and upper-class workers still jam the entrances on scooters and cars.

But at dusk, when they clear out, Hsinchu becomes something of a ghost town. Packs of stray dogs lope across a run-down basketball court in the shadow of generic office buildings. A few southeast Asian laborers drink beer next to a hulking construction site.

TSMC is in relatively good shape, compared to some other Taiwanese tech firms. Its technology is at the global cutting edge, giving it a competitive advantage that might just help it ride out the storm.

But the island’s flat-panel and memory-chip firms are hurting more. In these sectors, smaller Taiwanese firms are at a disadvantage to foreign rivals with deeper pockets and better technology.

Standing alone on a near-deserted street near his office, one 37-year-old flat panel worker said he’d had three days per month of unpaid leave since January. But he has worked those days anyway because he is too busy.

"Of course I’m a bit scared," he says. "But I think maybe this is the worst things will get."

It’s the memory-chip firms that are really in trouble, he says.

The memory-chip business is one of the most vulnerable in a downturn. That is because such chips are now commodities that fetch low prices and give companies only razor-thin profit margins.

The industry already suffered from a supply glut. Now, shrinking demand has driven chip prices below the cost of production, putting many firms in the red.

In Taiwan, two memory chip firms are flirting with bankruptcy. And in sharp contrast to how the crisis debate is playing out in the U.S., the government here said last week it would not bail them out, telling the companies in effect to sink or swim.

Instead, Taipei plans to create a new memory chip firm that can secure key technology from a foreign partner.

The worst-off firm, ProMOS, sits next to a waste treatment plant in a barren corner of the park. A few equipment salesmen chatted outside, but the grounds were otherwise deserted.

Across the park, the offices of Powerchip were a bit livelier. Three young women sat smoking outside the building. They took a fatalistic view of the firm’s plight.

"If it goes bankrupt it goes bankrupt, there’s nothing we can do about it," said one, exhaling a long plume of smoke. "It’s for the high-level bosses to figure out."

A 31-year-old Powerchip employee said he’d had six days of unpaid leave this month, and heard that might bump up to eight in April. "I just spend those days relaxing at home, watching TV," he said.

As co-workers scootered home on a road behind him, he said he was keeping a close eye on the benchmark memory chip price. That price, he said, would determine his fate.

"If the price goes up, we can have less unpaid leave. But if prices keep going down … "

He trailed off and laughed nervously. Then he excused himself, and shuffled off past a row of scooters and into the darkness.

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