Asia Flu? Depends on end product demand...................................
yahoo.com
Tuesday January 27 3:20 PM EST
US Tech Firms Seen Weathering Asia Turmoil
By Jose Paulo Vicente
NEW YORK (Reuters) - The U.S. technology sector will likely suffer only mildly from the ripple effects of a financial crisis plaguing East Asia, said an economist at the Federal Reserve Bank of San Francisco.
"The impact of East Asia on high-tech (firms) is not going to be that large," Robert Valletta, an economist at the San Francisco Fed, told Reuters in an interview.
The effect of the crisis on the sector is expected to be small primarily because East Asian nations do not represent a large share of the final demand for U.S. high-tech products.
"A lot of what we ship to Asia are semi-conductors and processors that are then taken over in East Asian manufacturing plants, and used for final assembly of computer equipment that is then sold all over the world," Valletta said.
In other words: As long as demand for the final products -- assembled computers, monitors, among others -- is not badly hurt, Silicon Valley can breathe a sigh of relief.
In fact, Valletta said, worldwide demand for such products is either stable or showing signs of increasing.
The San Francisco Fed economist cited anecdotal evidence that European countries have increased their appetite for computers manufactured by U.S. firms.
"High-tech people that I have spoken with recently have indicated to me that demand from Europe is coming back in a noticeable way.
"So to the extent that they're going to get an East Asian slowdown, at least some of that will be replaced by strengthening demand from Europe," he said.
Meanwhile, domestic demand for high-tech products has yet to show any signs of weakness.
Dataquest, a San Jose, Calif-based market research company, reported late last week that shipments of personal computers in the United States jumped 18.5 percent in the fourth quarter, and a booming 20.9 percent for all of 1997.
The increase took place despite the Asian crisis, which is perceived to have started in mid-1997 when Thailand sharply devalued its currency, the baht.
The Thai move triggered a slew of speculative runs against several other East Asian currencies, which culminated in economic turmoil across much of the region.
Also, in the short-run, the crisis may, paradoxically, help some U.S. high-tech companies, especially those which operate assembly plants in East Asia.
"The short-run impact of the East Asian situation on a lot of computer and semiconductor companies was actually to make them slightly better off because ... they face lower operating costs after the currency devaluations," Valletta said.
Most recent data show U.S. high-tech heavyweights, such as software behemoth Microsoft and microprocessor giant Intel, showed rising earnings and positive results for the quarter ending Dec 31.
However, several executives in the sector, including Microsoft's chairman, Bill Gates, have warned economic weakness in East Asia was clouding the outlook for the year ahead.
Wall Street has had a mixed response to the impact of the Asian crisis on the sector.
Although some scattered rallies were detected, analysts said high-tech stocks have been mostly under pressure for a couple of months on concerns that the slowdown in Asia might hurt the firms' performance in the future. |
