TAIPEI — Manufacturers in the local semiconductor and steel sectors said Wednesday that a government decision to raise domestic electricity rates will increase their operating costs and squeeze their profitability.
Advanced Semiconductor Engineering Inc. (ASE), one of Taiwan’s leading integrated circuit packaging and testing services providers, said the electricity rate hike, which is slated to kick in Oct. 1, is expected to cut the company’s gross margin by about 0.2 percentage points.
The assessments came after the Ministry of Economic Affairs announced that it will raise domestic electricity rates by 8.49 percent on average, which is lower than a previous plan for a 9.64 percent increase.
For the manufacturing sector, power rates will rise 10.4-12.2 percent, lower than a previously planned hike of 11.6-13.6 percent.
Despite the reduction in the hike, ASE said that as power consumption accounts for 3.5-4 percent of the company’s total operating costs, the increase will still have an impact on its operations.
With the Oct. 1 hike, the ratio of power consumption to the company’s total operating costs is expected to rise 0.2-0.4 percentage points.
An ASE rival, Siliconware Precision Industries Co.. also expects the higher power rates to increase its operating costs, as power consumption makes up about 3.5 percent of the company’s total costs. It did not give further details about the impact.
Currently, electricity consumption costs Siliconware NT$100 million to NT$150 million per month, the company said.
Meanwhile, China Steel Corp., Taiwan’s largest steel product supplier, said that based on an 11 percent hike in electricity rates, the company will need to pay an additional NT$2.78-NT$3.1 per kilowatt hour from October.
China Steel said it is possible the company will have to spend an additional NT$200 million on electricity for the fourth quarter, adding that this will raise its operating costs for 2014 by almost NT$800 million.