Investment interest in China among Taiwanese firms is slackening this year as Chinese taxation rules grow increasingly unfavorable and production costs climb, an annual report by the Taiwan Electrical and Electronic Manufacturers’ Association (TEEMA, 電電公會) showed yesterday.
Citing a survey of 2,312 firms that operate in China, the association said the investment environment scored 3.172 this year, the lowest since the technology bubble burst in 2001, while investment risks soared to 2.587, the highest since the global financial crisis in 2008.
There was little surprise in the findings, as nearly 70 percent of the polled firms said they are looking at an unprofitable year, it said.
Only 32.46 percent of firms voiced plans to expand operations in the Chinese market, 3.82 percent lower from last year and down for the fourth consecutive year, Chung Yuan Christian University business management professor Leu Horng-der (呂鴻德) said, presenting the results on behalf of the association.
“Investment risks are heightened in China, where authorities have tightened accounting rules and introduced measures against tax evasion and loose capital flows,” Leu said.
The series of changes has driven up operating overhead, making it more difficult to turn a profit, he added.
Many Taiwanese firms have long moved manufacturing facilities to China to take advantage of cheap land and labor costs there.
In recent years, non-manufacturing firms have followed suit, attracted by the fast-emerging and vast domestic market, Leu said.
Only 23.15 percent of respondents expect to stay in the black this year, while 69.75 percent were looking at losses of up to 50 percent, he said.
To grow into a major economic player, China has been developing its own supply chains in various sectors and courted skilled workers from Taiwan with high salaries, Leu said.
“The problem of brain drain may prove the most serious for Taiwan in the next five years,” Leu said, citing international studies.
Only about 44.72 percent of respondents intended to keep their headquarters and operations in Taiwan, down from 45.32 percent last year, he said.
Slightly more than 10 percent were planning to shut factories in Taiwan and keep only marketing staff, Leu said, which suggests continued capital flight.
Nearly 13 percent of respondents said they wanted to team up with Chinese firms and 7.45 percent hoped to attract funds through a listing in Taiwan, he said.
Another 7 percent expect to return to Taiwan and urge the government to lend a helping hand by creating favorable terms, Leu said, adding that a minor 4.32 percent said they expected to close their business in Taiwan.
Chengdu in Sichuan Province, Kunshan in Jiangsu Province and Suzhou Industrial Park top the survey for most favored investment destinations, Leu said, adding that Shenzhen in Guangdong Province could becomethe region’s “Silicon Valley,” derailing Taiwan’s effort to win the status.
Shenzhen is home to the Shenzhen Stock Exchange and the headquarters of several homegrown multinational high-tech companies such as Tencent Holdings Ltd (騰訊), ZTE Corp (中興), BYD Co (比亞迪), and Huawei Technologies Co (華為).
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to