Quanta to expand China workforce

Quanta Computer Inc (廣達電腦), the world's biggest contract notebook maker, is shifting more of its manufacturing workforce to China in a move to strengthen competitiveness by reducing labor costs, a company executive said yesterday.

"The workforce adjustment is a necessary step for Quanta to enhance our global competitiveness," said company spokesman Tim Li (李杜榮) in a statement submitted to the Taiwan Stock Exchange Corp yesterday.

To reach the goal, Quanta aims to make its factory in Shanghai a major manufacturing base while transforming its Taiwanese factory into a research and development center, Li said.

Li's remarks came amid local newspaper reports that Quanta had dismissed 800 workers after shutting down a notebook computer plant in Taoyuan County, northern Taiwan. The company offered to double workers' severance pay and encouraged them to apply for jobs at affiliate Quanta Display Inc (廣輝電子), the reports said.

Li confirmed the reports.

"We are gradually reducing the percentage of our manufacturing workforce [at the Taiwanese operation], while increasing that of researchers," Li said.

Shares of Quanta fell NT$1 to close at NT$52.20 on the local bourse yesterday.

Quanta's move reflects the global trend toward moving the manufacturing of electronics to the world's workshop, China, taking advantage of its cheap labor, said Sean Hsiao (蕭文良), an analyst with Fubon Securities Investment Services Co (富邦投顧).

The layoffs were the biggest of their kind in recent years, amid similar relocations of manufacturing by Quanta's local competitors Compal Electronics Inc (仁寶) and Inventec Corp (英業達).

Taiwan's major laptop computer makers are expected to make almost all of their products in China this year, up from 82 percent last year, according to market researcher Market Intelligence Center (市場情報中心).

"As computer giants Dell Corp and Hewlett-Packard Co are developing huge operations in China, Taiwanese computer makers including Quanta have to follow suit to deliver products fast for those heavyweight clients," Hsiao said.

Austek Computer Inc (華碩), the world's biggest supplier of computer motherboards, however, is lagging in setting up Chinese manufacturing lines for its laptop computer business.

Asustek diversified into the brand-name notebook computer area several years ago and recently began making laptops for big computer vendors such as Apple Inc.

"We have no immediate plan to allocate production to China in the near term. A large portion of our laptop computers will still be made in our plants in Taiwan," Asustek spokesman Sunny Hang (韓德行) said yesterday.

Aside from a motherboard factory in Suzhou, Asustek is renting 1 million square meters of land in Shanghai, which is in development.

"But, in the long run, Asustek still will have to move more manufacturing lines to China considering the lower labor cost there," Hsiao said.

Asustek can afford the higher-priced labor in Taiwan as it still enjoys decent gross margins from its brand-name business, in contrast to contractor manufacturers, he said.

But the pressure to cut costs will increase after entrants like Hon Hai Precision Industry Co (鴻海精密) join the game, he said.

Asustek is expected to ship about 4 million notebook computers this year, Hsiao said.