Tue, Mar 15, 2022 page11

• Taiwan tech bracing for spillover effects of war

  SANCTIONS: Taiwanese firms are concerned over the Ukraine war’s effect on businesses in nations near the conflict, including bad debts and cash flow problems

  • Staff writer, with CNA
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  Taiwan’s tech sector could face rising costs stemming from the war between Russia and Ukraine, while companies with operations in Eastern Europe are bracing for economic spillover from a war that is being fought “right up to their doorstep,” industry representatives said.

  Despite Asia’s geographic distance from the conflict and its relatively low level of financial exposure to Russia and Ukraine, the comprehensive nature of the sanctions imposed on Moscow — including its exclusion from the SWIFT international payment system and a ban on semiconductor exports to Russia — make some spillover inevitable, experts said.

  A number of Taiwanese tech firms have facilities in Poland, the Czech Republic and Slovakia, meaning the war is being fought “right up to their doorstep,” Taiwan Electrical and Electronic Manufacturers’ Association (電電公會) deputy secretary-general Yen Su-chiu (顏素秋) said.

  

  Taiwan Electrical and Electronic Manufacturers’ Association deputy secretary-general Yen Su-chiu attends a news conference in Taipei on Feb. 24.

  Photo: CNA

  While Russia accounts for less than 1 percent of Taiwan’s electronics exports, some of these firms might face bad debts and related cash flow problems as a direct or indirect result of the sanctions, she said.

  A greater fear is that the economic impact of the conflict would spread across Eastern European markets.

  Etay Lee (李宜泰), president of motherboard and graphics card manufacturer Gigabyte Technology Co (技嘉科技), said that while Russian clients accounted for less than 3 percent of the firm’s revenue, he was concerned about the potential for economic spillover in neighboring countries.

  For many small to medium-sized Taiwanese firms with investments in the region, the question now is how and when to cut their losses to avoid potential cash flow issues and contractual disputes.

  A survey of more than 100 Taiwanese firms with business in Russia and Ukraine, conducted on March 1 and 2, found that trade between the two countries had all but ceased after the outbreak of war on Feb. 24, the Importers and Exporters Association of Taipei (台北市進出口商業公會) said.

  The survey found that about 70 percent of respondents were having difficulties collecting debts, while more than 20 percent were concerned about possible contractual disputes due to shipping delays or stoppages, the association said.

  A final concern is the key position that Russia and Ukraine hold in the export of specific products, despite forming a combined total of just 2 percent of global trade, said Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at the French investment bank Natixis SA.

  In a recent analysis, Garcia-Herrero highlighted Russia’s significant share of the export of products such as neon gas (70 percent), palladium (37 percent) and nickel (9 percent), which are vital to Asia’s semiconductor and electric vehicle battery producers.

  “The proportion of these materials is small, but critical in supply chains,” meaning that the costs for these industries would grow if Russia restricts exports, she said.
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