News commentary by TPCA

 

News briefing

           The new coronavirus epidemic has spread and more than 7000 cases have been confirmed worldwide. Wuhan, the city where the virus started, has closed its doors to all personnel. In recent years, Hubei Province has become the new settlement for circuit board, memory products, and panel productions and the electronics supply chain is expected to be heavily impacted if a large-scale shutdown occurs.

 

Impact analysis

 

           Although mainland China’s production advantages have been weakened in recent years, the region continues to play an important role as a global factory for electronic products. In particular, approximately 63% of the output value from Taiwan's PCB industry is produced in mainland China and Japanese manufacturers also produce nearly 30% of its output value in this region. As already observed, the following developments of the coronavirus epidemic should result in varying effects on the supply chain.

 

 

           Even if the coronavirus epidemic is placed under effective control, it is likely that some non-local personnel may not be able to return to work immediately. Therefore, the number of working days and the capacity utilization of the relevant plants will be somewhat reduced. But, the epidemic should not affect the overall supply of products to customers. The current lack of personnel may be worsened by the difficulties in recruiting workers from other provinces. In the long run, Taiwanese manufacturers will have to consider the risk of placing excessive production in mainland China more carefully and perhaps they might speed up this deployment of placing production bases outside of mainland China.

 

           If the coronavirus epidemic cannot be effectively managed and a controlled territory situation occurs with a city shutdown that is expanded to cities in eastern and southern China, then this is expected to be the best measure to avoid collective cross-infection among personnel in the short-term. In this case, most of the upstream and downstream electronic production lines in mainland China will also be shut down, while electronic production factories in South America and Southeast Asia will be responsible for this production. As for the performances of Japanese and Korean PCB manufacturers, they have fairly scattered overseas production bases and have also conducted plans in Southeast Asian regions such as Thailand and Vietnam for some time now, as well as having the help of the production capacity from their local plants. Meanwhile, Taiwanese manufacturers solely rely on the supply of their local production capacity, so it is uncertain whether the market share of their output value will decline. In the future, Taiwan will accelerate their plans for production lines outside of China, while the mainland-based manufacturers will be delayed from rapid growth in recent years. Considering the global circuit board industry, the return of the three key PCB competitors such as Taiwan, Japan, and Korea as leaders in the industry is inevitable, whereas the mainland-based manufacturers are expected to face a long period of restructuring.