Compal Electronics Inc chairman Rock Hsu (許勝雄) and other industry leaders on Wednesday discussed the challenge of moving production out of China. One of the concerns Hsu and others have is that nowhere else provides a comprehensive supply chain for the roughly 2,000 components that go into building a personal computer or similarly complex electronic device. Finding new sources would be time-consuming and expensive, and manufacturers are already struggling to remain financially competitive, Hsu said.
However, foreign companies have been looking to move at least some of their production out of China for years, due to rising labor costs and Chinese government policies that favor domestic firms. The US-China trade dispute has added urgency to an existing trend.
Hon Hai Precision Industry Co chairman Terry Gou (郭台銘) in October last year said that electronic components maker Cheng Uei Precision Industry Co would be moving some of its production back to Taiwan, while Delta Electronics Inc has announced plans to invest NT$13.2 billion (US$422 million) in Taiwan in the next three years.
However, Cheng Uei and others have brought up concerns over insufficient power, land and skilled labor in Taiwan and Southeast Asia. They have also cited problems with insufficient infrastructure and restrictive bureaucratic policies in ASEAN countries.
The government has attempted to address some of these concerns with its New Southbound Policy and Forward-looking Infrastructure Development Program.
The government might also want to establish a task force to assist companies with sourcing components, or work with the governments of Southeast Asian countries to build factories and train workers.
A Reuters report on Nov. 29 last year said that there was a serious lack of skilled labor in Vietnam and no plans to improve the situation. The report cited infrastructure concerns in Vietnam and Thailand that were making it difficult to manufacture in or export from those countries on a large scale.
The government should talk to Southeast Asian countries to gauge their interest in addressing these issues. Taiwan cannot build this infrastructure on its own, but it could cooperate with other nations. For example, Thailand hopes to improve its deep-water ports, airports and railways through its US$45 billion Eastern Economic Corridor development project.
The US and possibly other countries might also be willing to cooperate on infrastructure projects to mitigate increasing Chinese influence in the region.
While producing minor components, cables and fittings in Southeast Asia, Taiwanese businesses could make high-tech components in Taiwan.
Given Kaohsiung Mayor Han Kuo-yu’s (韓國瑜) interest in making his city rich, it is likely he would grant permission to use land to build facilities there, and the city could step up the development of sources of alternative energy, such as wind farms and solar power facilities, storing daytime energy surpluses in batteries as Tesla has done in California.
Taiwan has needed to diversify its economy for years and has been over-relaint on China. The US-China trade dispute might be the impetus needed to spur change. Reducing reliance on China would not only be good for Taiwan’s economy, it would also mitigate threats to democracy from Chinese “incentives.” Politicians would also be less empowered to make promises and threats based on the economic need to maintain friendly ties with China.
The Democratic Progressive Party government should do as much as it can now to accelerate the exodus of Taiwanese companies from China.
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