Economy, Sci & Tech

Taiwan in Iran: Implications of Investment

Taiwan in Iran: Implications of InvestmentTaiwan in Iran: Implications of Investment

Taiwan has long sought to portray itself as a major player in East Asia and recent talks with Beijing have not tempered Taipei’s enthusiasm to build on its prior successes to act unilaterally and in some ways to counter Beijing’s growing dominance in Asia.

With the removal of trade sanctions on Iran, a delegation of Taiwanese companies visited the country to explore trade with the Islamic Republic and feel out Chinese and South Korean competition.

Headed by Timothy Tesso, a private consultant, the delegation of companies such as Asus, Micro-Star International—otherwise known as MSI—Gigatech Computer were all present to discuss possible cooperation between the two countries, IRNA reported.

Tesso said bilateral trade between Iran and Taiwan was about $2.8 billion in 2005, which increased to $5.6 billion in 2008, which are noted as the best years for the country at the time.

However, the consultant noted that the slowing of trade due to sanctions saw trade numbers at $1.8 billion in 2013 and $1.3 billion in 2014, but the brands remained present in some guise through grey importers via Dubai.

 The Loss of PCs

The drop in trade follows the wider trend in East Asian companies’ fortunes with regard to the Iranian market. However, with the lifting of sanctions and the growth in technology industry in the intervening years, these Taipei companies could see their fortunes turn around.

Like much of the rest of the Middle East region, Iran has seen the numbers of people buying PCs and traditional computing machinery fall, with only replacement acting as the main driver of sales.

MSI, which in the early 2000s commanded prime retail space in Tehran’s electronics bazaars, has lost much of its lead in recent years with companies such as Samsung overtaking them in market share and product development.

Same goes for Asus, which 10 years ago was at the top of its game but lost much of its sheen as it failed to tackle emergent mobile players head-on.

Due to the structure of distribution inside the Islamic Republic, the Taiwanese companies may find it difficult to grow their market share further.

Earlier this month, Financial Tribune reported that the historical bazaar structure in Iran acts as an impediment to the growth of larger retailers. In comparison, the UAE and even smaller Persian Gulf countries have far more organized retail outlets such as hypermarkets and specialist electronics stores, which account for around 40-60% of sales.

However, in comparison to this report, the Business Monitor International noted that the easing of sanctions and a more supportive economic environment, particularly from mid-2016, will promote the Iranian consumer electronics market to a higher growth trajectory.

BMI added that the main reason for this is the increasing supply of new devices. Domestic spending growth is above the historical trend, as vendors tap low device penetration rates in key categories such as notebooks, tablets and smartphones, which is a bonus for these Taiwanese brands when looking to reenter on a more substantial scale.

Given the competent atmosphere for growth, if MSI, ASUS and their competitors could quickly take advantage of Iran becoming a regional leader in terms of technological take-up and sales.

Whether or not these Taiwanese companies can regain their footing in this lost market remains to be seen in the next couple of years and their fortunes in Iran and elsewhere are directly tied to their offering. But, as previously noted, they may have to face a dwindling market share in the next few years due to a shift in consumer habits.