Sat, Feb 15, 2020 - Page 12 News List

Virus disruptions weigh down firms

DESPERATELY SEEKING SUPPLY:With raw materials in jeopardy, firms are looking elsewhere to secure their supply chain, while others mull relocating away from China

By Crystal Hsu  /  Staff reporter

Persistent production disruptions in China would not only delay 5G deployment, but also take a toll on Taiwanese firms that depend on raw materials from across the Taiwan Strait, economists said yesterday.

Many Taiwanese firms in China are still unable to resume normal operations amid an outbreak of COVID-19, and uncertainty remains high about the timing and scale of regular operations, Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) researcher Liu Meng-chun (劉孟俊) said.

The Taipei-based think tank contacted Taiwanese companies in China to better understand the epidemic’s impact.

Some firms have resumed 60 percent of production capacity, but many others only have capacity of between 20 and 40 percent, due to a severe lack of labor, Liu said.

Employees have had difficulty returning from the extended Lunar New Year holiday, because of travel restrictions and concerns over the COVID-19 outbreak, the economist said.

Firms are cautious about resuming operations, as the disease has not shown signs of stabilizing and infection risks remain high, Liu said.

China’s Hubei Province, whose capital, Wuhan, is at the center of the outbreak, on Thursday again extended the holiday by another week to Thursday after confirmed cases soared by more than 15,000 in a single day with the adoption of a new diagnosis method.

Companies must meet government requirements before applying to local Chinese administrators for approval to resume operations, Liu said.

If the disruption persists, firms without the support of their parent groups could soon suffer a cash strain, while large conglomerates would prove resilient, thanks to stronger financial flexibility, he said.

The ongoing supply-chain disruption could also negatively affect local companies that depend on raw materials from China, regardless of their production location, Liu said.

The National Development Council (NDC) said that makers of auto parts, machinery tools and petrochemical products rely heavily on raw materials or components from China, which account for 40 percent of exports and 20 percent of imports in Taiwan.

NDC research director Wu Ming-huei (吳明蕙) said that some firms could seek supply elsewhere, but others need more time to adjust.

The outbreak could also disrupt 5G deployment, Liu said, as Chinese technology brands are tapping the business, with assistance from local chipmakers, chip designers and other electronics suppliers.

Smartphone sales have reportedly taken a dive in China as the virus chills and restricts consumer activity.

CIER economist Peng Su-ling (彭素玲) said that Taiwanese firms in China would mull relocating manufacturing bases, but they are preoccupied with tackling chain disruptions for the time being.

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