- The number of South Korean and Japanese tourists visiting Taiwan in September jumped from a year earlier as a result of tensions between Seoul and Tokyo
- Relations between the two countries have hit new lows, sparked by a feud over compensation for Koreans forced to work in Japanese factories during WWII
A trade spat between Japan and South Korea is sending tourists from both countries to Taiwan and orders for semiconductors are tipped to go the same way.
Relations between South Korea and Japan have hit their lowest point in decades, after South Korea's Supreme Court last year awarded damages against Japanese companies which used Koreans for forced labour during World War II.
The decision sparked a diplomatic row that soon hit trade relations, with Japan slapping export restrictions on key materials that South Korean companies need to make semiconductors and flat-panel displays in July. Two months later, Tokyo removed South Korea from a "white list" of preferred trading partners, prompting Seoul to file a complaint with the World Trade Organisation.
Tourism operators in Taiwan are reporting a big jump in the number of South Korean and Japanese visitors to the island as a result of the tensions.
"Japanese and South Koreans don't go to each other's country to travel," said Peter Lin, head of the Topology Travel Agency in Taipei. "It's quite obvious now."
Taipei-based itinerary planning service KKday has seen South Korean and Japanese clientele nearly double the past year, boosting the company's bottom line, said Yuki Huang, the company's chief marketing officer and executive vice-president.
"Their numbers will continue to go up," Huang said, adding he expected tensions to continue through to the South Korean legislative elections in April next year. "The trade war will probably go into next year, and if that's the case, with relations poor, Koreans will come here and that's good for us."
In September 95,639 South Koreans visited Taiwan, up from 77,457 during the same month last year, data from the Taiwan Tourism Bureau showed. The number of Japanese tourists to Taiwan also increased to 189,946 in September, compared with 162,689 in the same month of 2018, bureau figures showed, while about 600,000 fewer South Koreans visited Japan between July and September 2019 compared to the same period of 2018.
In terms of the tourism sector, South Korean visitors to Japan have gone off a cliff. It seems likely that many South Koreans are now choosing Taiwan as a destination over JapanAlex Holmes
"In terms of the tourism sector, South Korean visitors to Japan have gone off a cliff," said Alex Holmes, an Asia economist with Capital Economics. "It seems likely that many South Koreans are now choosing Taiwan as a destination over Japan."
Taiwan is promoting itself to the South Korean market this year, a Taiwan Tourism Bureau spokeswoman said. Taiwan's tourism sector is grappling with a plunge in tourists from mainland China after Beijing limited the number of tour groups visiting the island, which it considers a wayward province awaiting reunification, and banned independent travel in August this year.
Outside the tourism sector, some analysts say the simmering bilateral dispute could also prove a boon for Taiwanese semiconductor manufacturers, who may stand to benefit from a slowdown in supply from South Korean chip makers.
"Japan's export curbs would slow or disrupt the production activities in Korea's semiconductor sector," said Ma Tieying, an economist with DBS Bank in Singapore. "This would, in turn, prompt global buyers to switch orders to Taiwanese semiconductor suppliers."
Taiwanese exports of semiconductors outperformed South Korea in the third quarter of this year possibly because of spin-off from the trade dispute, Ma said, with the launch of the iPhone 11 in September giving Taiwan another boost. Apple normally hires Taiwanese handset suppliers and assemblers.
Taiwan's economy grew a faster-than-expected 2.91 per cent year-on-year in the third quarter, the island's statistics office said on October 31.
South Korea-based Samsung and SK Hynix control about 73 per cent of the world dynamic random access memory (DRAM) chip market and 47 per cent of the market for NAND flash memory chips, political economist June Park wrote in a September comment piece for East Asia Forum. PCs, phones and television sets use these parts.
SK Hynix will begin to cut DRAM production from this quarter and reduce flash wafers, which are memory components that can be erased and reprogrammed, by 15 per cent over 2018 output, market research firm Counterpoint said in an August 1 note. The firm must cut spending on one or the other to "reduce the risk of raw material shortage," Counterpoint said.
The effects on Taiwan's semiconductor sector should be muted, Taipei-based market research firm TrendForce told the South China Morning Post.
"It's tricky to tell whether supply chain issues in Korea are driving demand for Taiwanese chips, as customers switch suppliers," said Holmes, of Capital Economics.
Taiwan Semiconductor Manufacturing, the world's biggest semiconductor contractor, has seen no changes in orders because of the Japan-South Korea dispute, company spokeswoman Elizabeth Sun said.
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