Exports gaining in China

China is set to overtake Taiwan as the world's No. 3 manufacturer of information technology hardware according to the Institute for Information Industry, as China's cheap production costs lure Taiwan's makers of IT products.

The Institute's Market Intelligence Center (MIC) estimated that Chinese information hardware production will reach US$25.535 billion this year, growing 38.4 percent over lsat year.

And while Taiwan's gross information hardware production value will reach US$48.076 billion this year, only US$23.209 billion-worth of products are manufactured in Taiwan, with the remaining US$18.577 billion worth -- or a whopping 38.6 percent of the total -- manufactured in China.

Indeed, according to the MIC, Taiwan's production lines in China will make up 72.8 percent of that country's total information hardware production this year and that as much as 51 percent of Taiwan's information hardware production will take place in China next year.

According to MIC analyst Wang Sheng-hung (王勝宏 ), Taiwan IT hardware makers are currently keeping their research and development departments here while expanding production overseas.

However, observers say that the percentage of IT hardware made in Taiwan may fall considerably if the ban on manufacturing of notebooks PC is lifted.

Indeed, most of Taiwan's big name notebook makers have already established plants in China to build notebook components for assembly back in Taiwan and will be able to swing into production almost immediately if the government decides to lift the ban.

Leading the pack in the relocation of information hardware makers are mouse makers, with 95 percent now being produced in China.

Power supplies come in second, with 90 percent being produced in China, and keyboards rank third at 86 percent.

Scanners, computer cases, CD-ROM and DVD drives, and monitors are also relocating their manufacturing lines, with over 60 percent of each product group being manufactured in China.

Notably, 45 percent of Taiwan's desktop computers were assembled in China, the same percentage as for motherboards.

Wang said that the real threat to Taiwan's information industry is China's growing capabilities in design and manufacturing technology.