The persisting COVID-19 pandemic would dampen local tech firms’ business outlook for the rest of this year, when benefits from remote learning and teleworking would fade away, Taiwan Ratings Corp (中華信評) said yesterday.
Taiwan Ratings, the local arm of S&P Global Ratings, stood by the forecast that Taiwan’s economy would contract 1.2 percent this year, as it cannot stay above the global recession, although it has reined in the virus outbreak without draconian lockdowns.
“Rush orders for laptops and other devices would dry up in the second half of the year, when relief programs around the world would expire, allowing poor economic fundamentals to set in,” corporate credit analyst Raymond Hsu (許智清) told a media briefing in Taipei.
Virus infections continue to spike in the US, Europe and parts of Asia, dimming the chance of a high sales season for technology products, Hsu said, expecting solid declines in sales of PCs, smartphones, servers and information technology spending this year.
The pandemic and lingering US-China trade tensions force diversification of manufacturing facilities and drive up production costs, Hsu said, referring to Washington’s blacklisting of Chinese tech giant Huawei Technologies Co (華為).
Taiwanese firms on Huawei’s supply chains would also take a hit, but might come out of the woods after gaining new customers, Hsu said.
If Apple Inc takes over Huawei’s market share, local firms would emerge unscathed, as many collaborate with the US technology titan, he added.
However, it would be a different story if Samsung Electronics Co grabs more market share, which would benefit South Korea’s supply chains, Hsu said.
Regardless, the virus crisis is lending support to digitalization and accelerating investment in cloud computing and 5G infrastructure, which would provide the catalyst for a recovery next year, he said.
Local banking institutions could see their return on average assets decline to a 10-year low of 0.3 percent this year due to increasing credit costs, doubled bad loans and lower interest rates, financial credit analyst Serene Hsieh (謝雅瑛) said.
Central banks worldwide have cut interest rates to ward off a credit crunch and asked lenders to support companies affected by the outbreak, squeezing the room for profitability, Hsieh said.
The credit outlook is gloomier for domestic life insurers, as low interest rates would constrain investment yields, foreign-exchange costs would weigh on earnings and negative interest spreads would deteriorate, she said.
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