President Barack Obama has been spending considerable time on East-West trade agreements while in Asia, but for one chip maker, the negotiations between China and Taiwan are even more important.

The two countries are slowly moving toward a formalized trade agreement, called the Economic Cooperation Framework Agreement, or ECFA, that will address how their economies relate to each another. Its first iteration isn’t expected until early 2010, but Taiwan-based tech companies are already hoping to gain entry to China’s massive consumer market.

That’s especially true for Via Technologies, a chip maker running a distant third behind industry heavyweights Intel (INTC) and Advanced Micro Devices (AMD). The company, founded in 1987, made a name for itself working on an underdeveloped part of the market: small, low-power chips.

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Corning (GLW) this morning said it suffered a power disruption over the weekend at its LCD glass manufacturing facility in Taichung, Taiwan which affected some glass-making operations. Corning said the disruption “is expected to have a material impact” on Q4 glass volumes. The company said the power disruption caused the shutdown of several glass melting tanks.

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The rush by Asian liquid-crystal-display makers to ramp up production at home and to invest in new plants threatens to curtail the nascent recovery in the flat-panel market.

LCD makers in Asia have just started to see their earnings recover in the second quarter after prices began to rise thanks to production cuts made last year, component shortages and strong demand from China. But another supply glut could be looming as soon as the current quarter as companies such as Sharp Corp., Samsung Electronics Co., LG Display Co. and AU Optronics Corp. ramp up production from new lines.

“With the glass shortage diminishing in Taiwan, and [eighth-generation plants] ramping up in Korea, supply is growing faster than demand,” said Paul Semenza, senior vice president at U.S. market research firm DisplaySearch.

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Two years ago, Asustek wowed the world with the hottest selling computing product to arrive in recent memory: the Eee PC netbook. But even that blockbuster device has failed to do much to boost the company’s brand in the United States, a situation the Taiwanese computer maker intends to correct.

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Shares of both Seagate (STX) and Western Digital (WDC) are getting battered on fears that the hard-drive sector could once again soon find itself with a glut of supply.

At least in part, the Street is reacting to this morning’s downgrade of Marvell (MRVL) by Barclays Capital, which–as I noted earlier–was in response to indications from Taiwanese component makers of a slowdown PC demand. Barclays chip analyst Romit Shah wrote that “every company that we met with [in Taiwan] indicated that PC order rates are slowing into the back-to-school season.”

Meanwhile, Collins Stewart analyst Ashok Kumar today notes new data on drive production that he thinks raises ominous clouds for Seagate in particular. Kumar says data from Techno Systems Research, a Japan-based market research firm, find that hard-drive unit production was down 18 percent sequentially in the March quarter, comparable to a 15 percent decline in PC shipments.

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When the popularity of Barack Obama meets the popularity of iPod speaker docks, you get…an Obama iPod speaker dock.

But Taiwan-based Ozaki, the company behind the dancing President-elect, didn’t stop there. The Obama dock is part of its iMini line, which fuses the technology of an iPod dock, radio, alarm and speakers–and fuzzy fabric.

If there isn’t music playing for the Obama doll to wobble to and fro to, then a microphone picks up ambient noise, and Obama dock will start dancing on its own. The demo model Obama sported a “Change” T-shirt and played a video of will.i.am, a noted Obama supporter.

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Liquid crystal display panel inventory is still higher than demand for the panels, despite deep discounting in stores, write the research folks at Avian Securities this morning. Based on “ad hoc checks,” the report observes, while heavily discounted items are being sold, overall inventory is still above demand. The report notes that there are rumors of mergers being encouraged by the Taiwanese government between LCD panel makers AU Optronics (AUO) and Chi Mei Optoelectronics, but opines that “we find little to be excited about unless such a combination reduced capacity going forward.”

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Shares of $90 million (market cap) Silicon Motion (SIMO), the Taiwanese maker of chips to control flash memory and computer cameras, are falling after the company this morning said the current quarter’s decline in sales will be much deeper than previously thought, with sales falling 25 to 30 percent sequentially, versus a prior forecast of 10 percent. The firm said its gross profit margin is expected to still come in at 48 to 50 percent, as previously stated. Operating expenses are also unchanged from the prior forecast at $15 million to $16 million.

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Things keep getting worse for Corning (GLW), as demand for large-screen LCD televisions sags in the face of a global consumer recession.

The LCD glass maker this morning said it is now withdrawing the financial guidance it provided just a few weeks ago for the fourth quarter and for 2009.

In a statement, CFO James Flaws said that “Panel makers, particularly those in Taiwan, have continued to reduce the utilization of their factories heading into the second half of this quarter in response to weakened retail demand for LCD televisions and desktop monitors.” He added that demand in the company’s wholly owned display glass business “has dropped more precipitously than we expected just a few weeks ago,” with “additional, but less severe, reductions in demand at Samsung Corning Precision Glass,” its joint venture in South Korea.

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Shares of glassmaker Corning (GLW) and LCD panel producers AU Optronics (AUO) and LG Display (LPL) are all down sharply today amid a new wave of market jitters on the prospects for the flat-panel display market.

Several recent Street research reports note that conditions in the LCD panel sector have been difficult for much of the third quarter, raising questions about the companies’ ability to hit current Street estimates.

Brian White, an analyst with Collins Stewart, noted in a roundup piece on the electronics supply chain today that he visited last week with three leading Taiwan-based LCD panel makers, and came away with a “reinforced” cautious stance on AU Optronics, which he rates Hold.

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