Taiwan’s Perfect Storm: Covid Spikes, Water Shortages, and Power Outages

Written by Denis Simon.

Image credit:  總統視導中央流行疫情指揮中心 by 總統府/Flickr, license CC BY 2.0

In early 2021, Taiwan’s health care system was ranked number one globally for the third year in a row by NUMBEO’s Annual Online Survey. Its overall performance buoyed the island’s ability to consistently earn such a high ranking during the first 12-14 months of the Covid-19 global pandemic beginning in 2020. Taiwan officials initially were able to ward off any significant damage from the pandemic by pursuing a highly aggressive strategy to keep the virus at bay. While other international rankings, such as the World Index of Healthcare Innovation, do not rank Taiwan as number one in its rating system, there is consensus across the board internationally that the government has proven itself highly effective at managing its single-payer health care system, mainly due to its innovative approach to digital health records. Moreover, with a population of 23.5 million people and a GDP per capital of over US$53,000, Taiwan has joined several other developed nations in offering an above average, high-quality set of health care services that are highly cost-effective (only 6.6% of GDP compared to the US which spends 18.8%) and very patient-centric.

So, it probably was no surprise to many observers as well as the island’s inhabitants that Taiwan authorities did so well compared to many other countries in handling the challenges posed by the onset of the coronavirus as it emerged out from Wuhan, China, in early 2020. The first case of Covid-19 was reported on January 21, 2020, involving a 50-year-old woman teaching in Wuhan. From that moment, going forward, Taiwan’s government put in place several critical measures to arrest the virus and prevent it from spreading as it had in many other countries across the globe. According to the Journal of the American Medical Association, Taiwan authorities introduced 124 discrete actions that helped to prevent the virus from spreading, including screening flights coming from mainland China and closely tracking and tracing individual cases. In March 2020, the government decided to stop foreign nationals from coming to the island (with some humanitarian exceptions); they also created a 14-day quarantine requirement for all who could land on the island. By October and November, government measures were further tightened to include a negative Covid-19 test required to be recorded within the first three days after arrival. As a result, between April until December 2020, Taiwan went 253 days without a single reported infection!

Observers of the Taiwan response to the appearance of the Covid-19 pandemic cite six reasons why the island’s health system was able to respond so effectively: 1) timely establishment of the Central Epidemic Command Centre (CECC) and its precision prevention strategy of allocating the limited medical resources to the most high need areas with the help of artificial intelligence technology; 2) effective border control and quarantine policies; 3) effective face mask policy, including production, distribution and export controls to ensure availability; 4) the National Health Insurance system that covers 99% of the population and guarantees that the costs of treatment are covered by the government; 5) transparency of information combined with public education that helped to reduce uncertainty and ease apprehension; and 6) application of technology, with particular reference to the use of big data technology and artificial intelligence to detect, track and monitor the movement of the disease as well as compliance with quarantine protocols.

What seemed like a major public relations victory for the government under the leadership of Tsai Ing-wen of the DPP Party, along with a triumphant moment for the island’s health care system, soon shifted 180 degrees in the opposite direction. In April 2021, a new outbreak stemming from the actions of several crew members from China Airlines resulted in a major surge in the number of Covid-19 cases. In addition, another cluster emerged from a local Lion’s Club International gathering and from Taipei’s Wanhua nightclub district, where several patrons engaged in evening entertainment that helped contribute to the further spread of the virus. Initially, not many of the patrons involved were willing to admit their visits to what some call Taipei’s “red light” district for fear of public humiliation and ostracism from their families. The two events seemed unrelated until a former president of the Lion’s Club admitted he had visited one of the tea houses. Taiwan health officials admitted that they were unprepared for this type of transmission pathway and thus could not quickly discover what was happening on the ground.

One of the unfortunate consequences of the strong performance of Taiwan’s health care system during the initial year or so of the Covid-19 pandemic was a sense of over-confidence and a lower sense of worry about more significant challenges that might be lurking around the corner. First, by spring 2021, the level of vaccinations among the Taiwan population only reached about 1%; there had been no great pressure to worry about achieving herd immunity because the disease simply seemed under control. Moreover, popular support for the government’s prior actions was so high that the type of public pressure that one might accept during such a crisis simply was absent. Second, rather than joining the race to import as many inoculations as possible, Taiwan officials had chosen to wait to develop their own domestically sourced vaccines. This was a major error, given that there had been no redundancy in their planning. Moreover, when Taiwan officials later attempted to remedy that situation, they ran into political barriers stemming from the “one-China policy” of several countries as well as the fear of retribution from China among several companies who did not want to show publicly an overly friendly posture towards Taiwan. And finally, the situation was exacerbated because the infrastructure for mass testing was never built due to the low incidence of the virus during the first year.

As luck would have it, the conditions for a perfect storm started to emerge, with the appearance of new variants of the pandemic reaching the island by May 2021. With one of the least vaccinated populations in the Asia-Pacific region and little preparation for dealing with the new variants, Taiwan began to experience a rapid rise in cases as well as a sharp increase in deaths from the disease. As one source suggested, “the reason why the Covid-19 spiked so quickly in Taiwan is that the virus found immune territory.” This prompted government officials to raise the alert level to three out of a four-point severity rating system. Subsequently, the level three alert was extended several more times till July 12 as of this writing. The rapid pandemic spread and the absence of a concerted response achieved the prior year left the DPP government with egg on its face. Taiwan’s Central Epidemic Command Centre, which had been created in 2003 to address the SARS virus also emanating from China, witnessed a sharp reversal in its fortunes as it was unable to deal with the rising number of cases, especially given some of the core problems in the Taiwan health care system. In general, the low number of doctors and nurses combined with a hospital system that simply was not ready to deal with such a rapid surge led to vocal criticism from all segments of the population, including the once all-powerful Kuomintang Party (KMT).

One might ask why the situation in Taiwan has attracted so much attention when the pandemic has been a global phenomenon, and the island is not the only place where there have been and continue to be considerable spikes in the number of cases, e.g., India. Along with being a central focal point of conflict in China’s foreign relations with the US and Japan, Taiwan has become a critical source of semiconductors in the global supply chain for electronics and information technology products. By default, therefore, it also is an important supplier of electronic components to China since firms such as Foxconn, Apple, Qualcomm, Nvidia, and others depend heavily on semiconductor chips produced by the Taiwan Semiconductor Manufacturing Corporation (TSMC) and several others on the island for their production operations located on the China mainland. TSMC supplies 56% of the global semiconductor market; China accounts for at least one-third of global semiconductor demand. Therefore, any major disruption in the production and distribution of products from the island’s US$10.3 billion industry would have a significant impact on the overall global electronics industry. This is especially true given the current volatility in supply and demand. At present, the world is facing unmet demand for semiconductors due to the slowdowns worldwide caused by the pandemic. A glitch in Taiwan’s capacity to deliver products would make the situation considerably worse.

While much of the interest about Taiwan has focused on the connection between the spike in the Covid-19 cases and the potential disruption of production, a more severe problem has affected manufacturing operations, namely, a shortage of water caused by the prevailing global climate crisis. TSMC has said that it uses 156,000 tons of water per day, the equivalent of 60 Olympic size swimming pools. The water is required to clean the multiple layers of metal that go into making semiconductor devices. Fortunately, the company has had several fixes to offset the severity of the water shortages that exist more generally on the island. Nonetheless, the problem remains of great concern as the recurrence of drought on the island is likely to appear more frequently in the future. When combined with the potential impact that a Covid-19 spike might bring about, there remains a great deal of anxiety about the ability of Taiwan authorities to bring the current spikes under control. According to CNN reporting, at least five semiconductor companies operating southwest of Taipei have suspended some operations. The focus is on migrant workers whose movements can serve as an effective spreader, especially given the new variants becoming more common on the island. For example, King Yuan, a semiconductor testing and packaging supplier, had to suspend production for several days after 200 plus workers tested positive.

If all of this was not unnerving enough, the island was also affected by an erratic power supply that caused both brown-outs and black-outs. Taiwan officials are planning some long-term solutions, including the expanded use of solar energy. Environmentalists do not want to build any more coal-fired plants because Taiwan also has announced some ambitious goals for reducing its carbon footprint.

The bottom line is that the current situation has become extremely messy for all involved and especially for Taiwan’s economic and technology leaders, who are trying to ease concerns about the reliability of the island’s producers. The combination of the recent large COVID spike plus the water shortages and power outages has led a number of US companies to suggest that perhaps America is too dependent on Taiwan. Taiwan, on the other hand, is worried that China is getting more and more competent in the production of semiconductor devices and if current efforts announced by Beijing to promote its own domestic industry start to yield results, Taiwan could be left out in the cold with reduced access to both the US and mainland China markets. There also is fear that mainland Chinese companies will start to “poach” Taiwan engineers with attractive financial packages and other benefits. The worsening of Sino-US relations has only added to current anxieties, especially as PRC leaders seem increasingly impatient with accepting the current status quo in cross-strait relations.

Right now, however, the most badly needed issue facing Taiwan officials is their ability to acquire enough vaccines to arrest the current spike in the pandemic. Nevertheless, here too, Taiwan is caught up in the middle of tensions about its political status versus the humanitarian side of ensuring it can purchase enough vaccinations to create herd immunity. Could Taiwan trade chips for vaccines? This was one idea raised in discussions about how Taiwan could overcome the barriers to further vaccine acquisition. However, it refuses to accept Beijing’s offer to supply Chinese developed vaccines to the island for both political and medical reasons. Japan and the US so far have continued to provide significant donations of vaccines. Still, in contrast to the initial phases of the pandemic, the demand for vaccines among the Taiwanese population has grown quite rapidly. The good news is that Taiwan has a sophisticated health care system, even considering the complacency that unfortunately occurred since the beginning of 2021. However, the bad news is that even as the situation starts to improve, enough questions have been raised about the security and sustainability of supply for semiconductors and related components that there may now be a long shadow sitting over Taiwan that will be hard to erase.

Denis Simon serves as the Executive Director of the Center for Innovation Policy at Duke’s Law School.  He also is Senior Adviser to the President for China Affairs at Duke University.

This article was published as part of a special issue on Taiwan’s Covid-19 Spike.

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