Southeast Asia attracting contract manufacturers

For years, Taiwanese electronics contract manufacturers have flocked to Chinese cities such as Shenzhen, Guangzhou, Suzhou or Wuxi to maximize their revenues and minimize their costs.

But Southeast Asia, and in particular Vietnam, is firming as an alternative base for contract manufacturers, iSuppli Corp said in a report yesterday.

"A new hot spot has emerged in electronics manufacturing: Southeast Asia; namely Singapore, Malaysia, Thailand and -- most prominently -- Vietnam," the El Segundo, California-based market researcher said.

The Southeast Asian contract-manufacturing market -- including electronics manufacturing services and original design manufacturing providers -- is poised to top US$24.9 billion by 2011, from US$16.2 billion last year.

The market achieved a compound annual growth rate of 9.1 percent, the technology researcher said.

By 2011, Southeast Asia will account for 7 percent of global electronics contract-manufacturing revenues, up from 6.3 percent last year, iSuppli forecast.

Vietnam has offered investment and tax incentives to foreign companies to boost its high-tech sector and reduce the country's dependence on agricultural products.

The country has attracted investment from a number of Taiwanese manufacturers, with Compal Electronics Inc (仁寶電腦), the world's second-largest contract notebook maker, the latest to take the plunge.

On June 15, Compal chairman Rock Hsu (許勝雄) told reporters after the annual shareholders meeting that the company would invest in Vietnam. He said the move was part of a strategy to boost notebook production capacity to catch up with sector leader Quanta Computer Inc (廣達電腦).

Compal hopes to churn out 20 million portable computers this year, up from last year's 14.5 million. It shipped 9.8 million in 2005.

The Vietnamese government said last month it would give priority treatment to Compal, which will invest US$500 million in a plant in Vinh Phuc Province, near the capital Hanoi.

The company already has production plants in Poland, China, Thailand and the Philippines.

But despite signs of a Southeast Asian resurgence, China's role as the world's preeminent workshop for electronics manufacturers is likely to continue for years to come.

iSuppli projected that 52.4 percent of all contract-manufacturing revenues last year were generated by companies operating in China, including Foxconn International Holdings Ltd (富士康控股), Flextronics International Ltd, Quanta and Compal.