Owing to Taiwan’s advantages in the global electronics industry and multinational companies’ growing tendency to shift their production bases out of China, the local industry could benefit in the post-COVID-19 pandemic period, Yuanta Securities Investment Consulting Co (元大投顧) economist Yen Chen-hui (顏承暉) said last week.
The Taiwanese electronics industry — the pillar of the nation’s manufacturing sector — is riding on cutting-edge technology trends in the areas of 5G, artificial intelligence (AI), the Internet of Things (IoT) and blockchain, despite facing pandemic woes, Yen said in a report released on Friday.
“Tech trends are not changing because of the virus, and Taiwan is fortunately well-positioned on the tide of radical innovations such as 5G, AI, IoT, blockchain, etc, while living habits of people may change a great deal in the next few years because of technology advancement. Overall, Taiwan should have many opportunities to ride on these tech trends,” Yen said.
The report said that the global electronics industry has been characterized by “low customization, mass production” over the past two decades, with only PCs, notebook computers and mobile handsets being connected to the Internet.
As a result, manufacturers pursued “standardization and mass production” of their products, a scenario that helped turn China into the world’s factory because of its low labor, land and raw material costs, while hollowing out Taiwan’s industrial base and leading to an outflow of talented Taiwanese, the report said.
However thanks to the AI, 5G and IoT trends, the electronics industry is shifting to “high customization, small production,” with connected devices no longer being limited to PCs, notebooks and handsets, but also extending to many more devices in an interconnected world, ranging from Bluetooth-enabled headsets and wireless speakers to smart watches, vacuum cleaners, refrigerators and vehicles, the report said.
In an increasingly interconnected world, demand for modules used in connected devices is bigger than before, and it is impossible that only a few large firms could provide them all, it said.
That is because the specifications of such modules would vary among devices, thus requiring much more customization — an opportunity for Taiwan’s many small and medium-sized enterprises (SMEs) in the electronics industry that are good at flexible production, Yen said.
“This change will benefit Taiwan, as its vibrant SMEs and respect for intellectual property rights will enable Taiwanese firms to win niche opportunities, as Taiwan’s value is rediscovered and investment opportunities arise,” he said.
However, COVID-19 has knocked global growth expectations for this year off course, Moody’s Analytics said on Wednesday, forecasting that global growth might slow to 1.9 percent this year, down from the 2.6 percent it forecast in January.
China’s GDP is expected to rise 4.6 percent this year, 1.6 percentage points weaker than predicted in January, while US economic growth would be 1.4 percent this year, compared with the 1.9 percent predicted earlier, Moody’s Analytics said in a report.
The outbreak has evolved beyond being a shock emanating from China and into a truly global problem, Moody’s Analytics said, adding that its weekly business confidence survey shows expectations of current and future conditions have deteriorated to their lowest level since the global recession in 2009.
“If businesses believe that conditions six months ahead will be just as weak as they currently are, they will continue to hold back on investment and hiring, and the risk that this will become a self-fulfilling prophecy is high, adding further damage to global growth expectations,” Moody’s Analytics senior APAC economist Katrina Ell wrote.
“It is not the virus itself, but rather the fear and panic related to the virus and the associated altered economic behavior that could be a damaging tipping point, forcing the global economy onto a darker path,” she added.
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