Thu, May 30, 2019 - Page 12 News List

Tech dispute could harm Taiwan more than S Korea

By Kao Shih-ching  /  Staff reporter

A technology dispute between the US and China could hurt Taiwan more than South Korea, as there are more Taiwanese companies in Huawei Technologies Co’s (華為) supply chain and the nation’s electronics exports to China account for a higher share of its GDP, DBS Bank Ltd (星展銀行) said in a report on Monday.

Electrical machinery and equipment exports to China accounts for 19 percent of Taiwan’s GDP, much higher than South Korea’s 6 percent, Singapore-based DBS economist Ma Tieying (馬鐵英) said.

Among Huawei’s 92 core suppliers, 10 are from Taiwan, including Taiwan Semiconductor Manufacturing Co (台積電) and Largan Precision Co (大立光), while only two are from South Korea — SK Hynix Corp and Samsung Electronics Co — she said.

Even if consumers replace their Chinese electronics products with those made elsewhere, South Korea could gain more than Taiwan, she said, adding that consumers are likely to shift from Huawei smartphones to those made by Samsung, which leads the global market with a 21 percent share.

“In fact, South Korea may have benefited from the substitution effects on Chinese products during the previous rounds of China-US trade war, which started in the middle of 2018,” Ma said.

The share of Chinese imports to the US declined by 6 percentage points from June last year to March, while the share of South Korean imports rose by 0.4 percentage points and those from Taiwan rose only by 0.2 percentage points, the report said.

While the trade dispute would drive technology companies to diversify their production bases, South Korea is better prepared than Taiwan, it said.

South Korea’s outward foreign direct investments (FDIs) target various regions, while Taiwan’s are concentrated in China, it said.

“Although the share of China in Taiwan’s overall outward FDI has fallen sharply over the past decade, it remains at about 40 percent today,” Ma said.

DBS said it expects Taiwan’s GDP to grow 1.9 percent this year.

Taiwan’s central bank has limited space for monetary easing after leaving the rates at low levels for the past 11 quarters, Ma said.

The economy has room to expand the fiscal policy, but given that presidential and legislative elections are to be held in January next year, substantial government policy changes could be delayed until next year, she said.

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