Acer's Shih says notebook makers ready for China

MANUFACTURING: The chairman of Acer Group wants regulators to hurry up with relaxed rules that will allow greater China investment

By Dan Nystedt  /  STAFF REPORTER

Wed, Jan 17, 2001 - Page 17

Ahead of government plans to announce new China investment measures for Taiwan's high-tech community, Acer Group Chairman Stan Shih (施振榮) has advised regulators to move forward and allow companies to further expand their China investments.

"It's unreasonable to expect companies to go against the world trend and give up opportunities for profit on the mainland," Shih said in an article written for the financial Web site "That's especially true for companies that want to build global brands. Today's unrealistic rules have led to evasion and obfuscation."

Shih said rules are needed to help the nation's manufacturers best take advantage of China's market and labor resources and turn Taiwan into a "knowledge-based" economy.

In addition, Shih said that Taiwan "has a bright future in areas such as design, marketing and services. It has no future in low-end, labor-intensive manufacturing, and authorities should do nothing to deter companies from making such investments in China."

The statements follow closely a local news report yesterday stating Acer plans to begin the production of barebones notebooks -- minus the central processor -- at a Shanghai facility in February, after the government announces its new China policies.

Taiwanese firms are currently forbidden to manufacture notebook computers in China.

Acer Computer climbed NT$1.30 yesterday, or limit-up, to NT$20.40 on the news.

Industry players expect the new government policies to be announced by the end of January or early February, however, and all the nation's top notebook makers -- including Acer, Compal Electronics (仁寶) and Quanta Computer Inc (廣達) -- are gearing up to build notebook making facilities in China in anticipation of a policy change.

Of the three notebook makers, only Quanta has yet to build any kind of infrastructure in China, while competitors Acer and Compal invested years ago in computer monitor, PC shell, motherboard manufacturing and other component plants.

"Our third CRT monitor factory was finished in November ... [but] it could be converted for notebook production very quickly" if laws were to change, said Duke Lin, senior manager at Compal. "It would only take us one to three months to move the necessary equipment to China."

Lin figures his company could save on labor costs and lower component prices from Chinese companies -- between 3 and 5 percent of production costs -- if they moved notebook manufacturing to China.

That 3 to 5 percent cost reduction could help save the industry from dwindling margins or profit losses due to slowing PC and notebook sales this year.

Worldwide notebook computer shipments are expected to increase just 12 percent this year, versus nearly 20 percent growth each of the last two years, according to the Market Intelligence Center.

A number of analysts expect the slump to impact notebook makers here as foreign companies such as IBM, HP and Toshiba move to lower costs by asking their Taiwanese OEM partners to reduce their profit margins by a percentage point or two.

These factors are putting added pressure on notebook companies to build new factories in China. With profit margins so low and competition tight in Taiwan -- there are 10 manufacturers in the nation which produce the majority of Taiwan's notebook computers -- companies are clamoring to move production across the Strait.

Companies without China plans could require as much as a year or more to build the facilities needed to produce notebook computers.