While Taiwan’s technology sector is vulnerable to recent wage hikes in China because it relies heavily on Chinese labor, non-tech companies in cement, steel, consumer and real estate are unlikely to be affected, analysts said.
“For most non-tech Taiwanese companies, we believe the impact from the wage increase will be minimal from a consolidated profit and loss perspective,” Credit Suisse analyst Sidney Yeh (葉昌明) said in a client note on Friday.
Yuanta Securities Co (元大證券) also said the wage hikes could be a boon to local tourism.
“The industry will benefit over the long-term as rising salaries will lead to a better standard of living for Chinese workers and increase the number of Chinese tourists able to afford to visit Taiwan,” Yuanta said in a report last week.
Over the past two weeks, investors and analysts were on the lookout for signs of whether China’s wage increases would lead to profit pressures on Taiwanese companies, which have high exposure to the Chinese market.
For the non-tech sector, Yeh said in the note, the impact should be relatively minimal because many of the non-tech companies view labor costs as a small portion of their cost structure, with raw material costs accounting for a larger portion, and some companies already pay higher wages to their Chinese employees than the base wages required by local governments in China.
Based on Credit Suisse’s study, wage increases in China will have a limited impact on both Taiwan Cement Corp (台泥) and Asia Cement Corp (亞泥), because the two leading Taiwanese cement makers’ labor costs account for less than 5 percent of their cost structure in China.
Moreover, earnings from the two companies’ Chinese operations make up less than 15 percent of Taiwan Cement’s consolidated profits, and 25 percent for Asia Cement, the report said.
For the nation’s largest food manufacturer, Uni-President Enterprises Corp (統一企業), labor costs make up about 15 percent to 20 percent of its China cost structure and a 30 percent wage hike there would result in a 3 percent increase in labor costs for the company, Credit Suisse said. The Swiss brokerage, however, said higher wages would also translate into more sales in China to offset the impact of increased labor costs.
However, China Steel Corp (中鋼), which produces steel in Taiwan and ships nearly 8 percent of its products to China, is likely to benefit from rising labor costs in China, given its cost-efficiency advantage compared with its Chinese peers, Credit Suisse said.
ADDITIONAL REPORTING BY JASON TAN
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last