Foreign buyers shifting IT purchases to China

As the nation's information technology (IT) companies are moving manufacturing bases to China in droves, foreign companies are following their Taiwanese partners and shifting their procurement orders to China.

"We have seen a number of our local partners in the procurement field move to China in recent years," a public-relations official at NEC Taiwan surnamed Wang said yesterday on condition of anonymity.

"We have to adjust our international procurement procedures accordingly," Wang added.

Wang made the remarks in response to Chinese-language reports earlier this week citing NEC Taiwan's president Shinichi Kakimura as saying that NEC Corp, Japan's largest personal-computer vendor, planned to slash half of its orders placed to local companies this year.

Taiwan has been the main destination of NEC's overseas procurement orders for years. The company placed NT$29.3 billion worth of procurement orders to its local partners last year, according to the company.

"Since some of our partners are moving to China, we will place our orders to them directly through our China branch, instead of via the Taiwanese branch as before," Wang said.

Nevertheless, Wang shied away from predicting what the impact would be in terms of purchases from Taiwan this year.

Wang stressed that most of the orders directed to China would still go to China-based Taiwanese companies and therefore the orders Taiwanese companies receive this year would not drop dramatically.

In a bid to lower labor and manufacturing costs, Taiwanese IT companies have been moving their production bases to China in recent years. The nation's IT hardware industry saw over half of its production made in China, according to statistics by a local research house.

China-based Taiwanese companies were responsible for 63.3 percent of US$56.7 billion worth of Taiwanese IT hardware production last year, up from 47.5 percent of US$48.4 billion output value in 2002, according to figures by the Market Intelligence Center (市場情報中心).

The notebook computer sector, for example, saw 74 percent of production came from China in the first quarter of this year, up from 66 percent last year and 38 percent in 2002.

NEC's local contract makers for laptops, who took over half of the company's notebook shipments, include Quanta Computer Inc (廣達電腦), First International Computer Inc (大眾) and Arima Computer Co (華宇).

Quanta shares on the TAIEX rose 4.83 percent yesterday to NT$76, Arima gained 1.32 percent to NT$11.50 and First International dropped 3.13 percent to NT$6.35.