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The Honolulu Advertiser
Posted on: Tuesday, August 21, 2001

Asia feels effects of U.S. slump

USA Today

SAN FRANCISCO — Waves from the U.S. high-tech and economic slump continue to crash onto Asian shores: Analysts fear the onset of a global recession, and Japanese tech giant Fujitsu said yesterday that it will cut 16,400 workers.

"The U.S. economy — especially the technology sector — was the primary locomotive for the export economies of Japan, Korea, Taiwan and Malaysia," said Sung Won Sohn, chief economist at Wells Fargo Bank. "Now that the bubble has burst here, it's having a devastating effect on Asia."

Among the dire signs:

• Fujitsu, the No. 2 maker of personal computers in Japan and a leading maker of flash-memory chips, will lay off 10 percent of its workers, including 5,000 in Japan and 11,400 at plants in Thailand, Vietnam and the Philippines. An undisclosed number will be let go in the United States.

Fujitsu also will take a $2.5 billion writeoff and turn its plant in Gresham, Ore., into a joint operation with Advanced Micro Devices, a chipmaker based in Sunnyvale, Calif.

• The economy of Taiwan, a leading manufacturer and exporter of high-tech parts and goods, officially has entered a recession.

In the first year-to-year drop in 26 years, Taiwan's gross domestic product plunged 2 percent in the second quarter from the same time last year, Taiwan's government said Friday.

The news led Taiwan's central bank to lower interest rates by a quarter-point.

• When the U.S. economy started limping last year, Asia's economies were still dashing ahead at double-digit growth rates. Now, export-oriented Asia is expected to grow only 2 percent this year, with Japan's economy flat-lining. China predicts its huge economy will rise 8 percent this year. But analysts long skeptical of China's economic data say 4 percent to 6 percent is a more realistic figure.

The bad news yesterday from Fujitsu sent the Nikkei index in Tokyo plummeting 1.6 percent to 11,257.94 — its lowest in 17 years. Other blue-chip stocks fell, including Toshiba and Furukawa Electric, both down 4 percent.

Like a boomerang, the economic chill in Asia is circling back and hurting the United States. Economists call it the "international-multiplier effect."

Cash-poor Asian nations can no longer buy high-tech goods and other products from U.S. companies, which also rely heavily on overseas trade.

The International Monetary Fund recently said the world economy would grow 2 percent this year. Any growth rate below 2.5 percent is considered a global recession.

Analysts say the global high-tech economy is a victim of its own success. When technology sales were red-hot in the United States, the world benefited. Now, with the United States in a slump, the world is suffering.

Even the rollout this fall of Microsoft's new flagship software, Windows XP, won't light up global sales. "Many hoped the slowdown would be short and sweet," said analyst Mike Feibus at Mercury Research. "Now, it's turning into a recession with legs."