Growing Concern Over COVID-19 Outbreak in Taiwan

5/18/2021

Growing Concern Over COVID-19 Outbreak in Taiwan

We have seem a number of articles, primarily in the Asian press concerning a new COVID-19 outbreak in Taiwan. As Taiwan is an essential part of the semiconductor supply chain, those concerns are firing up the fear that there could be restrictions or lockdowns that further exacerbate the semiconductor shortage that is plaguing the consumer electronics space and digital economics generally. We understand the need for concern over the COVID-19 outbreak in Taiwan, but it is easy to overstate the problem when looked at in conjunction with COVID-19 data from the US. In fact, we are unable to accurate chart the comparative data as the scales are so different so we present them individually, but most important is noting the y axis which represents the number of individuals in each case.

Taiwan - COVID-19 - New Cases - Source: SCMR LLC, Ourworldindata

Based on Fig. 1 the outbreak in Taiwan is quite significant, over 12 times the peak back in March of last year and the breakout in the cumulative rate, in itself, is also concerning (Fig. 2), but a bit more perspective is gained when viewing Fig. 3, which shows the number of cumulative cases relative to 1M in population. With a total population of ~23.85m, even with the current spike, the cumulative infection rate in Taiwan is just a bit of 84 for every 1 million residents. In the US the picture is quite different, even with the very effective vaccine programs being promoted by the government. We have seen no new significant spike in new cases (Fig. 4) and the slope of the cumulative case rate has remained fairly consistent since the beginning of this year, but, in our view, the key metric is the new case rate/million population, which in Taiwan, even with the current spike, is 14 new cases/day/million population, while in the US that same metric is 161 new cases/day/million population.
While the headlines gain eyeballs, the data shows that while certainly concerning, the outbreak in Taiwan is not as overwhelming as some might make it sound, and even if restrictions for the general population are reinstated, we do not expect they will further limit semiconductor production in Taiwan, especially given that the semiconductor industry in Taiwan is more than 30% of total exports and generated ~$115b in output for the country. However, a recent note in the Taiwan press indicated that ‘industry sources’ were expecting a delay in the production of the mini-LED backlights needed for Apple’s (AAPL) new MacBook Pro because of the virus outbreak, pushing out the release into 4Q or even 1Q ’22 due to the resurgence of the virus, although others indicate that it is more of a yield problem than a viral one.
Taiwan Semiconductor (TSM) certainly the islands largest semiconductor foundry, has started work-at-home rotational scheduling for certain teams, as has UMC (UMC), and ASE Technology (3711.TT), and those companies where recent infections have been found have disinfected restricted some domestic and cross-plant travel, but the main prevention measure is returning to the rotational work at home system mentioned above. And is being instituted by most Taiwanese manufacturers, particularly those in major cities. Outbreaks are a reality of any highly communicable disease and can be controlled if acknowledged quickly, which seems to be the case in Taiwan, as new vaccinations in Taiwan jumped from ~2,000/day to about 16,000/day over the last 10 days.