News Column

Technology key for Taiwan firms to counteract competition

September 1, 2014



[ET Net News Agency, 1 September 2014] The rise of low-cost Chinese IT product and

component manufacturers poses a significant threat to more established Taiwanese peers,

according to a report that Taiwan Ratings Corp. published today on Standard & Poor's

Ratings Services' Global Credit Portal.

Taiwan Ratings is the Taipei-based subsidiary of S&P.

The report highlights the likelihood that Taiwanese credit profiles are under growing

pressure from the rise in Chinese competitors, particularly in the branded hardware and

TFT-LCD panel sectors, but the degree of impact differs among individual players.

"We expect China's branded IT hardware companies to make significant market gains and

strengthen their local supply chain over the next few quarters," said Taiwan Ratings

credit analyst Raymond Hsu.

"Technology leadership and product and service differentiation will likely be the key

factors helping Taiwanese technology firms sustain their market shares in the long term."

he added.

China's fast-growing IT market, low cost structure, and businesses' accumulated learning

curve as the global hub for IT manufacturing have supported rapid growth in China's IT

sector over the recent years, and that is likely to continue for several years to come.

In addition, the Chinese government has been very supportive of the IT sector through

government policy, which promotes the development of important technology segments

including semiconductors and thin-film-transistor liquid crystal display (TFT-LCD)

manufacturing.

According to the report, Taiwan's branded IT companies and TFT-LCD panel makers have the

highest competition risk from China's expanding competitor base, but Taiwan's

semiconductor and electronic manufacturing services sector should be able to cope with the

rising challenges.

"The growth of China's branded technology hardware firms is likely to nurture a stronger

local supply chain in China, thereby increasing competition for Taiwanese technology

companies in the regional IT supply chain," said Hsu.

"Nonetheless, we believe that the majority of Taiwan's largest high-tech firms will

continue to benefit from scale advantages, product differentiation, and technology

leadership, to offset the competitive threat for now. But commoditized product

manufacturers are likely to suffer from rising Chinese competition." he noted. (KL)


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Source: ET Net News (China)


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