Wed, Jun 03, 2015 - Page 8 News List

EDITORIAL: Electronics sector under threat

Amid the focus on the Internet of Things at this year’s Computex Taipei, there is a lot of discussion about the rise of the “red supply chain” — China’s electronic component suppliers — and its growing threat to Taiwanese manufacturers.

The absence of top players from global companies at Computex this week, such as Intel Corp chief executive Brian Krzanich and Microsoft Corp chief executive Satya Nadella, is another sign that China is gradually overtaking Taiwan as a key supplier to the world’s electronics industry. Both men attended a technology forum in Beijing last week organized by China’s top PC brand, Lenovo Group.

ARM Holdings chief executive Simon Segars is another no-show, although he attended last year’s show and took part in a forum discussing industry trends with MediaTek Inc chairman Tsai Ming-kai (蔡明介) and others. ARM is behind more than 85 percent of the world’s smart device chips.

These firms have sent marketing officials to Computex to sell products, but they are not showcasing new technologies or placing orders with Taiwanese manufacturers. They have used other trade shows, such as the Consumer Electronics Show in Las Vegas and its new Shanghai offshoot, to unveil their latest technologies.

This glaring absence of top executives and new products should serve as a wake-up call to Taiwan. China is overtaking Taiwan as a major electronics supplier to Chinese and global brands. The big questions are: how soon, and how will Taiwan cope?

Fears about the future of Taiwanese manufacturers gained new prominence after China’s State Council last month announced its new “Made in China” policy, the aim of which is to elevate that country to one of the world’s biggest manufacturing service providers in 2025, and one that can compete with its global rivals by 2035.

The council’s policy aims to reduce China’s reliance on foreign suppliers, and the information technology industry is Beijing’s top priority. The semiconductor sector is among the top 10 sectors targeted by the council.

The “red supply chain” will be a rival to Taiwan, Acer founder Stan Shih (施振榮) told reporters on Monday on the sidelines of an Internet of Things seminar arranged by Computex organizers.

Since Chinese manufacturers are only capable of supplying mid-to-low-end components, Taiwanese companies should try to safeguard their position in the high-end segment, Shih said. They could also enhance their competitiveness by leveraging their Chinese counterparts’ strengths, he said.

Local chipmaker Realtek Semiconductor Corp on Monday said that to fend off Chinese competition, it would focus on developing high-quality products for targeted markets.

Chinese manufacturers are already nibbling at Taiwanese manufacturers’ heels, as indicated by Taiwan’s weak export showing in April. Export orders shrank by 4 percent to US$37.32 billion in April. The biggest drop was in orders from China, down 10.3 percent year-on-year and the biggest slump since August 2009. A Ministry of Economic Affairs official blamed the contraction on China’s localization of component supplies.

China is expected to expand its supply of LCD panels, touch sensors and chips used in mobile phones and tablets, cutting into Taiwanese suppliers’ orders. Chinese manufacturers will gradually undercut Taiwanese suppliers by offering lower prices to brands from the US, Europe and emerging markets.

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