The technology manufacturing hub of Taiwan is still running despite COVID-19 knocking out businesses, schools, transport, and shipping routes worldwide. Some of the island’s tech firms have lost out on revenue or investments. But others have seen minimal changes or even increases in demand.
Coronavirus: Business and technology in a pandemic
From cancelled conferences to disrupted supply chains, not a corner of the global economy is immune to the spread of COVID-19.
According to data from Taiwan’s Center for Disease Control, as of Monday, there have been 306 confirmed cases of COVID-19 on the island with five deaths, but only 44 of them are locally transmitted cases.
The government has currently enforced several disease prevention measures, including 14-day quarantines for entering passengers and barring foreigners from entry unless they are diplomats, hold resident certificates, or have arrived on business. Large-scale public gatherings and travel overseas have also been discouraged.
It has also announced various subsidies and loans for many businesses affected by the coronavirus.
Lockdowns hit production
Chun-Hao Yueh, manager of Taiwan’s government-sponsored Industrial Technology Research Institute’s Industry, Science and Technology International Strategy Center, told ZDNet that the tech manufacturing industry has continued to operate normally for the large part and there have been no large-scale layoffs.
He said industries which tend to rely on mainland China for production or materials, such as cell and battery module packing, photovoltaic manufacturing, or computer and mobile phone assembly, have been the ones most negatively affected due to the mainland China lockdowns in the first quarter of 2020. This is followed by companies that manufacture machine tools, industrial machinery, petrochemicals, and display panels, which are mostly produced in Taiwan for the mainland China market. Some electronic component industries, such as passive components, are yet to have their production lines fully restored in mainland China, and are now facing many urgent orders to the point of needing overtime work to meet demand, he added.
Meanwhile, industries with high automation and technological content, such as semiconductor and optical lens, are the least affected.
He said the declines in demand in Europe and the United States would definitely have a larger effect on Taiwan’s tech industry compared to the lockdowns in mainland China, but the extent of its impact would depend on how quickly the virus spreads and the effectiveness of each country’s control and stimulus measures.
Losing orders from demand drop
Yueh said although the spread of COVID-19 would lead to revenue losses and potentially delay planned investments in automation, the situation remains relatively optimistic. Demand will be delayed but not disappear, he said.
Iris Pang, chief economist for Greater China at ING told ZDNet that “big companies should have enough cash flows to surf through the tide”. But smaller companies could have difficulties paying suppliers and suffer losses when global demand decreases lead to order cancellations, she noted.
Nelly Hsieh, global marketing manager at In Win Development Inc, which uses Taiwan production facilities to make enclosure systems for system integrators in Europe, the United States, and Asia-Pacific region, told ZDNet sales are down.
She said in the United States, e-commerce sites such as Amazon have prioritised deliveries of everyday goods over computer hardware. Amazon did not respond to a request for comment. In parts of the Asia-Pacific region, goods are also being held longer in warehouses because customs operations have stopped.
Henry Lai, in charge of Nextech Co, which uses Taiwan production facilities to make touch display devices for the Taiwanese, Japanese, European, and United States markets, told ZDNet that after the announcement of the 2020 Summer Olympics being postponed due to COVID-19, some of his company’s orders were cancelled or delayed.
In the European and the United States markets, a portion of existing customers have postponed the continuation of orders and daily inquires have decreased by about 80%, he said.
There are some success stories, however. Jessica Liu, partner at venture capital firm AppWorks, told ZDNet people are changing their routines and habits to stay at home more, leading to growth for e-commerce, fitness, and gaming apps in Taiwan.
“There’s no official lockdown, but people are trying not to go out too often,” she said.
Kevin Yen, CEO of price-comparison business BigGo, told ZDNet that his firm and e-commerce sites have been seeing more users and traffic growth. The most popular searches on BigCo last week were for face masks, thermometer guns, 75% alcohol, Switch, and the game Animal Crossing, he said.
Separately, a spokesperson for e-commerce business PChome told ZDNet that consumers are spending less time going out shopping and eating. PChome has seen an increase in orders for food, everyday products, cleaning supplies, gaming products, home fitness products, and home cooking appliances.
Customers are also ordering a wider variety of items, more items at once, and more of the same item than before, the spokesperson said.
Startups: some see opportunity, others see warning signs
Liu said AppWorks is continuing to write checks and willing to invest even in at-risk sectors, such as travel, because she sees the crisis as temporary.
“It’s probably the best time to take advantage of,” she said.
Success stories have come out of economic downturns. She said Uber came out of the 2008 financial crisis, Google came out of the dot-com bubble, and Disney out of World War II.
Although other investors in Taiwan are taking more cautious approaches.
Tina Cheng, managing partner at venture capital firm Cherubic Ventures told ZDNet her firm has held off on investing in travel-focused markets, or business models that require lots of subsidies and are capital limited as it’s now difficult to raise capital.
“We’re still looking at deals,” she said. “But trying to be more cautious and conservative.”
She added that global travel restrictions have prevented Taiwan startups from going abroad to seek funding for series A and B rounds. While Cheng noted that the amount of funding available at the seed and series A level in Taiwan has improved over the past few years, there is much less available as the amount goes upward.