New Taiwan labour package, small Taoyuan strike and talks pushed to 27 Oct, Meta capex above operating cash flow…
Labour risk in Taiwan continues to cool. The strike in Taoyuan on 22 Oct was in fact a 24-hour sit-in by 11 union officials rather than a full stoppage, so the direct impact on output is negligible.
Read more
Lu Donghui, chairman of Micron Taiwan, explained that a new package was signed with the Taichung union on 21 Oct (quarterly profit-sharing, a higher cap on annual performance bonuses and a voluntary labour pension contribution of 10%). The company has made concessions in return for stability. Labour costs rise, but the effect on gross margin is limited. The Taoyuan union says the package does not meet its four main demands (the core one being that 15% of operating profit be shared with employees) and has launched an intention survey. Taoyuan has a typhoon day off on 23 Oct because of Typhoon Qiangpi, so the second round of talks is pushed back to 1pm on 27 Oct. On the demand side, Meta's Q3 capex of $34.91 billion exceeded the quarter's operating cash flow of about $32.8 billion, leaving free cash flow of about negative $2.1 billion. The lower end of its 2026 full-year capex guidance was raised to $135 billion, with the upper end held at $145 billion. Jensen Huang said on CNBC on 22 Oct that demand at emerging AI cloud providers is off the charts, but scarce capital is limiting their expansion. Whether demand lasts after 2027 now hinges on funding, which sits uneasily with Micron's statement that shortages will persist for the next two years. Counterpoint said on 20-21 Oct that Chinese phone makers are using more recycled DRAM in entry-level models. It also said global smartphone shipments fell 20% year on year in Q3, the lowest for the quarter since 2012, mainly because of higher memory prices. The price rises have reached end products: consumer electronics shipments are shrinking and mobile DRAM volumes are under pressure, though prices are holding, while capacity keeps tilting towards HBM and servers. Next week's catalyst is SK Hynix's Q3 results on 28 Oct: HBM4 shipment progress (earlier reports said it was below expectations), 2027 HBM negotiations and pricing, and capex.
Key evidence
- Central News Agency and Lianhe Zaobao: the 22 Oct strike in Taoyuan was in fact a 24-hour sit-in by 11 union officials at the factory gate rather than a full stoppage, and the direct impact on output is negligible.
- China Times: Lu Donghui, chairman of Micron Taiwan, said a new package was signed with the Taichung union on 21 Oct: new quarterly profit-sharing, a higher cap on annual performance bonuses, and the voluntary labour pension contribution rate raised to 10%.
- Newtalk: the Taoyuan union considers the new package short of its four main demands (the core one being that 15% of operating profit be shared with employees) and has launched an intention survey in which permanent employees who are not union members also take part. It stresses that the aim is to gauge attitudes, not to hold a vote.
- With Typhoon Qiangpi approaching, Taoyuan declared a typhoon day off on 23 Oct, and the second round of talks has been pushed back to 1pm on 27 Oct.
- Meta investor relations press release: Q3 capex was $34.91 billion (including finance lease principal), above the quarter's operating cash flow of about $32.8 billion, and free cash flow was about negative $2.1 billion. The lower end of 2026 full-year capex guidance was raised from $130 billion to $135 billion, while the upper end stays at $145 billion.
- Jensen Huang, CNBC interview, 22 Oct: demand at emerging AI cloud providers is off the charts, but scarce capital is limiting their expansion.
Show 6 more
- Whether demand lasts after 2027 now depends mainly on funding, which sits uneasily with Micron's statement on 21 Oct that shortages will persist for the next two years.
- Counterpoint, 20-21 Oct: Chinese phone makers are using more recycled DRAM in entry-level models, and some are evaluating using recycled memory throughout the whole phone. Counterpoint says this shows just how severe the shortage is, and that it is only a short-term expedient.
- Counterpoint preliminary data: global smartphone shipments fell 20% year on year in Q3, the lowest for the quarter since 2012, mainly because of higher memory prices.
- Price increases have fed through to end products. Consumer electronics shipments are shrinking, mobile DRAM volumes are under pressure but prices are holding, and capacity continues to tilt towards HBM and servers.
- SK Hynix will issue a press release before 9am Seoul time on 28 Oct, followed by a conference call (SK Hynix website).
- SK Hynix on 28 Oct, what to watch: actual HBM4 shipment progress (earlier reports said it was below expectations), 2027 HBM supply negotiations and pricing, and capex plans.
Catalysts to watch
- Second round of talks at Micron Taoyuan at 1pm on 27 Oct (after the typhoon postponement)
- SK Hynix Q3 results on 28 Oct (HBM4 shipment progress, 2027 HBM negotiations and pricing, capex)
- Hyperscalers' 2027 capex guidance (the key to whether memory demand lasts after 2027)
- Progress in scaling up the use of recycled DRAM by Chinese phone makers
Risks
- The Taoyuan union's four main demands remain unresolved, the outcome of the 27 Oct talks is still open, and the risk of a strike has not gone to zero
- Labour costs rising (quarterly profit-sharing, a higher cap on annual performance bonuses, 10% pension contributions)
- Meta's Q3 capex exceeded operating cash flow and its free cash flow turned negative, second-tier cloud providers face funding constraints, and the floor under memory demand after 2027 could soften
- Tension with Micron's assessment that shortages will persist for the next two years: if 2027 cloud capex guidance is weak, the demand assumption is undermined
- Consumer shipments are shrinking: global smartphone shipments fell 20% year on year in Q3, the lowest for the quarter, and mobile DRAM volumes are under pressure
Show 2 more
- When the cycle turns, consumer demand may recover more slowly than in the past
- If SK Hynix confirms on 28 Oct the reports that HBM4 shipments are below expectations, the whole HBM growth narrative comes under pressure
Sources (7)
- Central News Agency / Lianhe Zaobao (scale of the Taoyuan strike sit-in)
- China Times (Lu Donghui on the new bonus and pay scheme)
- Newtalk (Taoyuan union intention survey)
- Meta investor relations Q3 press release
- CNBC, 22 Oct: interview with Jensen Huang
- Counterpoint, 20-21 Oct (Chinese phone makers' recycled DRAM and Q3 smartphone shipments)
- SK Hynix website (advance notice of the Q3 results on 28 Oct)
A brief is a lead for our research, not a verified conclusion or advice.