l The conflict between North and South Korea in the last three weeks may bring some good news for Taiwanese manufacturers in the petrochemical, LCD display panel, and DRAM (dynamic random access memory) sectors. Since no one knows how the already-tense situation on the Korean Peninsula would evolve next, many foreign buyers have been contemplating switching their orders from South Korea to Taiwan if the military conflicts worsen.
l Taiwan's trade organizations like the Petrochemical Industry Association of Taiwan (PIAT) have been urging its member companies to aggressively pursue orders that might have originally been given to South Korean firms. However, most expect the military conflicts between North and South Korea would be settled soon and won't escalate into a full-scale and protracted war. Accordingly, relevant industries should not be overly optimistic about the possible shift of orders from South Korea to Taiwan.
l Given the unpredictable nature of the North Korean regime, the wishful thinking in Taiwan is to make the switch of orders, if any, permanent. However, since many foreign clients have a wait-and-see attitude toward whether to shift their orders from South Korea to Taiwan—as they don't think the recent skirmishes will escalate into a war—many expect firms in Taiwan to benefit from the conflict on the Korean Peninsula for the short term only.
l As for the long term, any shortfall in the supply can be covered by the production facilities of South Korean companies outside the Korean Peninsula, including those in mainland China. On another cautionary note, if the South Korean won keeps depreciating against the US dollar due to the worsening of the ongoing conflicts, South Korea's export competitiveness will be boosted significantly, which, in turn, will be detrimental to Taiwan's exports of electronic goods and other related consumer products.
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