Contract electronics manufacturer Pegatron Corp (和碩) yesterday said that it has begun exploring overseas expansion options to cope with escalating US-China trade tensions.
The company is to reallocate production from China to its existing sites in the Czech Republic and Mexico as it reviews its global footprints, Pegatron chief executive officer S.J. Liao (廖賜政) told an investors’ teleconference, adding that it is also considering setting up new manufacturing bases in Southeast Asia.
Although reallocating production capacity and moving equipment between the company’s locations would not require substantial capital expenditure, the change would push up management costs, Liao said.
Setting up brand new production lines in Southeast Asia would be costlier and it would take two to three years before such facilities would come online, he added.
“We will be talking with our customers about sharing the burden of additional costs,” Liao said.
US President Donald Trump’s looming tariffs on US$260 billion of Chinese-made goods are not the only reason for the company to diversify its production, Liao said, adding that the entire supply chain is challenged by labor shortages and rising wages in China.
Diversification would also help push down the cost and difficulty of gathering the required workforce during peak seasons, Liao said.
To avoid US tariffs, products made outside China must meet country-of-origin requirements, which stipulate that 30 to 35 percent of the value of an exported product must be derived locally, Pegatron chief financial officer Charles Lin (林秋炭) said.
That could be more difficult for electronics assemblers, which rely on key components from China’s well-established supply chains and industry hubs, Lin said, adding that it would take until next year for the effects of trade tensions on demand to materialize.
Lin rejected reports suggesting that Apple Inc has cut iPhone XR orders from Pegatron and other suppliers due to lower-than-expected demand, saying that the company’s strong performance last month showed that the ongoing peak season has met expectations.
Pegatron’s plants have been running at full capacity, he said.
The company reported that revenue last month rose 55.1 percent monthly and 11.7 percent annually to NT$186.02 billion (US$6.06 billion), a new monthly high.
Pegatron previously reported that net income in the third quarter rose 5.1 percent quarter-on-quarter, but dropped 31.9 percent from the same period last year due to rising component and labor costs, as well as a delayed production ramp-up.
Net income was also dragged down by NT$140 million in foreign-exchange losses, down from gains of NT$1.01 billion in the previous quarter. Earnings per share were NT$1.08.
Revenue last quarter rose 18.7 percent sequentially, but dipped 4.4 percent from the same period last year to NT$322 billion.
Gross margin inched up from 3.2 percent at the end of June to 3.3 percent at the end of September, while operating margin rose to 1.1 percent from 0.6 percent in the second quarter.
Taiwanese firms have increased investment in the Philippines in recent years as Manila’s ties with Washington deepen and global supply chains continue to shift away from China, an expert at the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The Philippines had not been among Taiwanese investors’ top choices in Southeast Asia, CIER Taiwan ASEAN Studies Center director Kristy Hsu (徐遵慈) said at a seminar in Taipei. However, Taiwan’s investment in the country has grown significantly since the COVID-19 pandemic, reaching US $257 million last year, a high in recent years, she said. Although Taiwan’s total investment in the Philippines still lags
HSBC Holdings PLC is deepening its commitment to Taiwan as the economy emerges as one of the bank’s fastest-growing markets globally, driven by an artificial intelligence (AI) investment boom, expanding cross-border trade, and rising wealth creation. “The advantage that Taiwan has is a growth story linked to the semiconductor and broader AI industries, strong underlying corporate performance, and wealth creation,” said Surendra Rosha, HSBC’s co-chief executive for Asia and the Middle East, in an exclusive interview with the Taipei Times on June 2, during this year’s HSBC Taiwan Conference. That combination has helped HSBC cement its position as the most profitable international
Intel Corp regards Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) as a longstanding partner, as the US chipmaker would continue outsourcing production of advanced chips to TSMC, Intel chief executive officer Lip-Bu Tan (陳立武) said yesterday. “I don’t look at people as competitors. I look at the collaboration... Nvidia is also, you know, a good friend,” Tan told a news conference following his keynote speech at the Computex trade show in Taipei. “It’s a very trusted partnership for us... We are a big, top customer for them, and we’re going to continue doing that,” he said, referring to TSMC, the world’s largest foundry
Hon Hai Precision Industry Co (鴻海精密) yesterday said it would work with US chipmaker Intel Corp to jointly develop and deploy next-generation artificial intelligence (AI) infrastructure and intelligent computing platforms in a move to capture booming demand for AI computing systems. Hon Hai, also known as Foxconn Technology Group (富士康), said in a statement that the partnership would combine its global manufacturing scale, system integration expertise and AI data center deployment capabilities with Intel’s strengths in processor architecture, silicon technologies and software ecosystem. The companies said they plan to work on equipment used in AI data centers, including server racks powered by
RSS