A survey released yesterday showed that major foreign high-tech buyers haven't ruled out the possibility of shifting orders away from local suppliers if Taiwan's or China's production is paralyzed due to the spread of severe acute respiratory syndrome (SARS).
The Market Intelligence Center (MIC,
Many buyers are afraid that even a small outbreak in a factory could shut down an entire production facility.
Last Friday, the MIC polled executives from eight international procurement offices (IPOs) in Taiwan on their attitude about local procurement after the SARS outbreak in Hoping Hospital.
"Currently, they [the IPOs] haven't cancelled any orders [to Taiwanese firms]," said Helen Chiang (
The companies -- which Chiang declined to identify due to the anonymous nature of the survey -- account for nearly 70 percent of foreign tech hardware spending in Taiwan.
"A couple of purchasers said they may shift orders if Taiwan's suppliers' assembly lines were forced to shut down [if workers became infected]," she added.
One procurement executive said shifting orders would be a final resort. He added that as long as suppliers can offer efficient substitution plans, companies are unlikely to change partners, according to Chiang.
The think thank urged companies in Taiwan to prepare for the worst.
"It's difficult to predict how far SARS will spread ...companies have to stay on high alert and develop back-up plans," the MIC report said.
Dependent on China for exports, Taiwan may be at the mercy of Beijing's policymakers.
"The impact of SARS on our economy hinges on whether China can manage the outbreak of the disease and that's the part we have no control over at all," Wu said.
"Generally, the epidemic in China will affect the operations of Taiwan's businesses [in China] and disrupt the manufacturing supply chain, so we may face a weakened demand for Taiwan's products in the short term," said Wu Chung-shu (吳中書), a research fellow of the Institute of Economics at Academia Sinica.
Wu said there may be businesses that benefit from SARS.
"Although we will see declining orders for electronics products, we may also see increased demand for pharmaceuticals and medical services due to the disease," Wu said. "The negative impact will nevertheless outperform the positive one."
If the disease lingers on, the economic casualties will increase.
"If the disease outbreak continues to drag on for more than one quarter, it will affect the financial sector and foreign investment."
Last week the Ministry of Economic Affairs said in a report released yesterday that the worldwide spread of SARS could cut the nation's export orders by an estimated US$770 million in the second quarter.
For the first three months of this year, export orders rose 10.17 percent to US$37.67 billion from a year earlier, the ministry's statistics department reported on Wednesday.
Orders from China and Hong Kong in particular rose 18.94 percent to US$8.2 billion in the same period last year, according to the ministry's statistics department.
RSS