SARS may soon hit export orders

Local electronics manufacturers may see orders from China drop as foreign companies delay or switch production away from the country because of fears over SARS, market analysts said yesterday.

"Worries that assembly lines may have to be shut down if workers are infected has some Western companies considering switching production [outside China]," George Wu (吳裕良), an analyst at Primasia Securities Co in Taipei, said yesterday.

Last week the market speculated that Microsoft had instructed Singapore-based Flextronics International Ltd, contract manufacturer for Microsoft Xbox, to close its assembly line in China's Guangdong Province and switch production to the company's factories in Mexico, Wu said.

Dow Jones Newswires reported that Flextronics spokesperson Nina Posadas said the report was not correct.

The report, however, has hampered public confidence, and many foreign investors have decided to stop buying shares of companies that have concentrated their assembly lines in China, he said.

Low labor costs in China have attracted many of the world's top electronics companies in recent years. About 60 percent of the world's notebook computers and 80 percent of motherboards are made there.

The SARS-inspired cutback in business travel may also delay purchasing decisions.

"Face-to-face communications with manufacturers is important when developing new products," said Abel Wang (王勝宏), a senior analyst at Market Intelligence Center, a government-fund research center. "When Western business travelers postpone their trips to Asia, the product development process and time to market will also be delayed."

Even though no orders have been shifted to other countries, the possibility will increase if the situation continues to worsen, he said.

"With most orders for the first half of this year having been decided months ago, SARS will have little impact for the short term," Wang said. "But the long-term outlook is blurry ... how the market moves depends on how far the disease spreads."

Another market watcher said the situation is still okay.

"It doesn't seem like it is really affecting production or supply at this moment," Molly Lin (林美如), an analyst at Polaris Securities Co (寶來證券).

Based on comments from several electronic makers, as of mid April, production and shipments are on schedule, she said.

Even if Microsoft did switch orders away from China, the impact will be limited since the software giant is a minor player in the electronics sector when compared with Dell Computer, Sony and Hewlett-Packard, Lin said.

Existing manufacturing ties are not easily replaced since it usually takes at least several months for an agreement to be formed on the manufacturing of a new product, she said.