Taiwan’s economy performed well in the first half of this year thanks to an increase in global demand for technology goods and services amid the COVID-19 pandemic, but technology tensions between the US and China could hurt Taiwan by disrupting the existing supply chain, DBS Bank Ltd said in a report yesterday.
Demand for technology products could be divided into demand for computers and consumer electronics, mobile phones, digitalization, and automation, DBS economist Ma Tieying (馬鐵英) said in the report.
While the purchases of computers and consumer electronics during were likely one-off, demand for digitalization and automation, such as video streaming, e-commerce, online entertainment, as well as the use of robots and drones for the delivery of medical supplies and disinfection, would continue rising after the pandemic, creating sustained opportunities for the electronic components segment, Ma said.
However, in the short term, US-China tensions could negatively affect Taiwan by disrupting the supply chain, she said.
While Taiwanese semiconductor companies rely on the US for upstream integrated chip design, and supplies of semiconductor manufacturing equipment and chemical materials, they also rely heavily on the Chinese market, so they would be susceptible to Beijing’s restrictive measures on market access or the US’ reduction of advanced technology supply, she added.
In the long term, the imperative of the US and China to build their own semiconductor supply chains might add pressure on Taiwan, as both nations have been urging Taiwanese semiconductor firms to move more advanced operations to their country, Ma said.
“While the most advanced semiconductor manufacturing capacity remains in Taiwan, whether the nation’s comparative advantage will weaken as the US and China catch up will be a question for the coming decade,” she said.
Separately yesterday, Citibank Taiwan Ltd (台灣花旗) senior vice president Calvin Tseng (曾慶瑞) told a news conference that global financial markets might witness increased volatility in the third quarter of this year as selling pressure tends to rise.
That is because many investors will likely sell shares after many stock indices hit record highs, despite real economies not fully recovering from the effects of the pandemic, Tseng said.
“We expect real economies to take at least two years to recover from the outbreak, ” he said.
With the US dollar likely to remain weak against other major currencies amid a low-interest environment, Taiwanese investors are advised to exchange some of their US dollars into the euros, British pounds or yen, Tseng said.
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