The Wuhan pneumonia epidemic seems unstoppable, while plans to restart work across China after the Chinese New Year have been repeatedly delayed. According to Zhan Wen-nan, the director of Market Intelligence and Consulting Institute (MIC) of the Institute for Information Industry, if the shutdown continues into March or even April, the impact on China’s Red Supply Chain could be significant. Jim Chung, the deputy director of the Industrial Economics & Knowledge Center (IEK) of the Industrial Technology Research Institute (ITRI), considers that if the value chain of production throughout China is hit hard, it should reduce the pressure on Chinese factories to compete with Taiwan manufacturing, as well as the head-hunting of Taiwanese talent. Some Taiwanese factories might have then started to feel the effect of the transfer order, widening the industry gap.

City shutdown affects the date to resume work

The economy in China is affected by the epidemic

 
             Zhan, Wen-Nan has analyzed that if city shutdown measures are continuously expanded across China, it will be likely that the dates when work is expected to resume will be affected. According to optimistic estimates by China, the epidemic situation is likely to decline after reaching its peak in mid-February, and if this happens, it should have a smaller impact on the manufacturing industry. However, international estimates are less optimistic, and forecasts are that if the shutdown lasts into March or April, it will have a much greater impact.

 

 

 

If the epidemic continues into April, the effects of a ruptured supply chain might arise

 

        Zhan, Wen-Nan has pointed out that international manufacturers, including Taiwanese businessmen, have begun to globalize their businesses due to the trade conflicts between the United States and China over the last two years. As such, the short-term impact of the Wuhan pneumonia epidemic on Taiwanese businesses won't be so significant. However, some basic component factories, whose PCB factories and therefore their upstream supply chain, such as metal parts and plastic materials, have long been supplied by local Chinese manufacturers, may suffer a chain-rupture effect if the impact of the epidemic persists into April.

   As pinpointed by Jim Chung, if the epidemic situation affecting important industrial clusters in various parts of China cannot be alleviated, it will severely damage the local supply chain in China and even affect the long-term development of its industry, reducing the pressure of competition from the mainland factories towards Taiwanese factories and the head-hunting of Taiwanese talent. Surely, some Taiwanese manufacturing plants can lead the way and widen the gap. Nonetheless, if the economy in China declines due to regressing demands, our electronic products that account for a higher proportion of exports to China and Hong Kong, such as semiconductors, printed circuit boards, consumer electronics components, etc., may be negatively affected.

 

The rise of China’s Red Supply Chain

Labor of division across the Straits turns into competition
 

         The red supply chain means that "Red China" has gradually established a "self-supplied" production system, eliminating the purchase of parts and materials sourced from outside of China. As such, the scenario of cross-strait industry used to be a division of labor relations, but for now, it has turned into a competitive relationship and the rise of the red supply chain has directly impacted upon the supply chain from Taiwan. (News source: Liberty Times)