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.
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) is expected to share his views about the artificial intelligence (AI) industry’s prospects during his speech at the company’s 37th anniversary ceremony, as AI servers have become a new growth engine for the equipment manufacturing service provider. Lam’s speech is much anticipated, as Quanta has risen as one of the world’s major AI server suppliers. The company reported a 30 percent year-on-year growth in consolidated revenue to NT$1.41 trillion (US$43.35 billion) last year, thanks to fast-growing demand for servers, especially those with AI capabilities. The company told investors in November last year that
Intel Corp has named Tasha Chuang (莊蓓瑜) to lead Intel Taiwan in a bid to reinforce relations between the company and its Taiwanese partners. The appointment of Chuang as general manager for Intel Taiwan takes effect on Thursday, the firm said in a statement yesterday. Chuang is to lead her team in Taiwan to pursue product development and sales growth in an effort to reinforce the company’s ties with its partners and clients, Intel said. Chuang was previously in charge of managing Intel’s ties with leading Taiwanese PC brand Asustek Computer Inc (華碩), which included helping Asustek strengthen its global businesses, the company
Taiwanese suppliers to Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) are expected to follow the contract chipmaker’s step to invest in the US, but their relocation may be seven to eight years away, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. When asked by opposition Chinese Nationalist Party (KMT) Legislator Niu Hsu-ting (牛煦庭) in the legislature about growing concerns that TSMC’s huge investments in the US will prompt its suppliers to follow suit, Kuo said based on the chipmaker’s current limited production volume, it is unlikely to lead its supply chain to go there for now. “Unless TSMC completes its planned six
TikTok abounds with viral videos accusing prestigious brands of secretly manufacturing luxury goods in China so they can be sold at cut prices. However, while these “revelations” are spurious, behind them lurks a well-oiled machine for selling counterfeit goods that is making the most of the confusion surrounding trade tariffs. Chinese content creators who portray themselves as workers or subcontractors in the luxury goods business claim that Beijing has lifted confidentiality clauses on local subcontractors as a way to respond to the huge hike in customs duties imposed on China by US President Donald Trump. They say this Chinese decision, of which Agence
RSS