- Amid US invasion of Iraq and with the global economy mired in recession, Asia, the world dominant production center, is now facing the prospect of widespread Severe Acute Respiratory Syndrome infection. A potential SARS epidemic along with a host of other variables has complicated the Taiwanese IT industry future outlook. In addition to posing a certain threat to manufacturers operating in Greater China, the advent of SARS also highlights a number of possible shifts in corporate procurement and consumer behavior.
Negative Impact
Supply-Side
Areas within the IT industry most seriously affected would be manufacturing and R&D. Manufacturing conditions in Taiwan and China differ significantly. Possessing huge manpower reserves, China has exhibited a closed conservative attitude towards SARS. Even in the event of a SARS epidemic on production lines within China, large-scale factory shutdowns are unlikely due to China's large workforce. In Taiwan, however, SARS has already been officially classified a contagious disease, and hint of infection in factories would halt production. As business travel is avoided in hopes of minimizing infection risk, delays are expected for companies at the pilot run stage.
Demand-Side
As international vendors cut back on visits to Taiwanese suppliers, new entrants aspiring to secure contracts will be particularly hard hit. If the spread of disease continues rapidly, orders that would otherwise have gone to Asian companies will go instead to European or American manufacturers. Exhibitions and trade shows are important venues for companies wishing to unveil new products and obtain useful exposure. The combined impact of SARS and unrest in the Middle-East will very likely lead to lowered attendance at trade shows such as Infocomm, due to be held in Shanghai in April, and Computex Taipei, scheduled for June. Reduced attendance will deal a particularly heavy blow to manufacturers relying on trade shows for launch of new products.
Traditional retail distribution channels where public interaction is unavoidable entails a relatively high risk of infection. Faced with the SARS contagion, consumers are expected to either reduce spending or turn to on-line shopping, both of which will affect sales at retail outlets.
The Silver Lining
Avoiding direct contact with infected carriers is the surest safeguard against contraction of SARS. With current trends in IT applications already shifting away from direct contact toward mediated contact, software and service sectors are expected to benefit further from SARS-generated customer trepidation.
Risk of infection is increased when leaving the home. Helping to stimulate development of players which target home-based activities, growth will be seen most in game and e-commerce industries, as the threat posed by SARS will discourage consumers from venturing out. Home-centered amusements will be increasingly sought, with demand for games, DVD titles and home KTV (Karaoke Television) growing as a result. As consumers minimize visits to retail outlets, the number of transactions through virtual channels and on-line shopping will rise.
Because the appearance of SARS likely heralds subsequent emergence of similar diseases, e-enablement will become increasingly critical for enterprises. Advent of SARS has raised questions regarding traditional business behaviors. Companies have begun looking to technology for alternatives to the relatively high infection risk entailed in direct communication. Demand for video-conferencing will rise, assigning greater relevance to video-conferencing equipment and bandwidth. With employees restricted from travel to infected areas or under quarantine and thus unable to go to worksites, virtual office establishment will become increasingly important. Continual spread of SARS will severely curtail business travel options, necessitating e-adoption amongst Asian enterprises in order to secure contracts.
Epidemics and other natural disasters test government emergency response capability, often necessitating implementation of various ancillary measures. Following a major earthquake experienced in Taiwan during September 1999, government recognition of a need for improved earthquake-related information sharing between different regions stimulated development of the National Geographic Information System. Similarly, outbreak of SARS has alerted government officials to the need for establishment of a rapid-response medical information reporting system, which will engender increased demand for medical information system deployment. Once infection reaches a certain level, schools will be forced to close. Minimizing the impact on education, promotion of digital educational models such as e-learning and web-seminars will be promoted with greater effect, thereby creating new business opportunities.