Tue, Feb 11, 2020 - Page 8 News List

EDITORIAL: Virus prompting investment shifts

Taiwanese manufacturers are moving production out of China as the 2019 novel coronavirus (2019-nCoV) delays the resumption of work at factories there and increases the risk of supply chain disruptions.

Manufacturers are also stepping up production diversification after the US-China trade dispute triggered an exodus of Taiwanese manufacturers, mostly hardware makers, over the past one-and-a-half years.

Server and notebook computer maker Inventec Corp last year said it planned to spend NT$4.8 billion (US$159.46 million) to expand its local capacity while cutting production in Shanghai and Chongqing.

Quanta Computer Inc, which makes MacBook computers and Apple Watches, announced an investment of about NT$950 million to build a factory in Thailand to make laptops to ship to a major US client to avoid heavy US tariffs on Chinese goods and budgeted as much as NT$835 million to build production facilities in New Taipei City’s Linkou District (林口)

A second wave of production reallocation looks inevitable as 2019-nCoV, which has spread faster than SARS in 2003 and has exceeded its death toll, could curtail labor by at least 20 percent, Gartner Inc warned. Corporate executives should develop a supply-chain monitoring system to cope with potential raw material or component supply disruptions, Gartner said.

ASE Technology Holding Co expects only 80 to 85 percent of its staff in China to return to work this month as authorities there have imposed transportation restrictions and stringent quarantine measures. The world’s biggest chip packager and tester expects a full resumption by the end of this quarter, one month later than usual. Its broad production diversification means that the effect of the outbreak should be manageable, as only 5 percent of its capacity is in China, while most of the jobs could be replaced by its Taiwan operations, ASE said.

TrendForce Corp yesterday said that the labor-intensive smartphone manufacturing sector would suffer the brunt of China’s extended Lunar New Year holiday, transportation limitations and city lockdowns. The Taipei-based researcher forecast that smartphone shipments would shrink by 12 percent year-on-year to 275 million units in the first quarter, the lowest in five years.

Although not all Taiwanese manufacturers have planned as well as ASE, some firms, especially those in the labor-intensive components business, have taken additional precautions and taken measures to minimize the impact of the outbreak.

Camera lens module maker Zhong Yang Technology Co has applied for a second investment in Taiwan worth NT$200 million to expand its capacity in Taichung following a NT$770 million investment last year. The new funds were approved by the Ministry of Economic Affairs last week.

Printed circuit board (PCB) manufacturers are more nervous than other component makers, as Hubei Province, where the disease arose, is a major production site for such firms. PCB makers are taking emergency steps to boost production and expand capacity at local fabs to reduce reliance on Chinese fabs.

Meanwhile, PCB suppliers Apex International Co and Chin-poon Industry Co are expanding capacity in Thailand.

These companies’ actions indicate that more Taiwanese manufacturers are soon to unveil new investments either in Taiwan or in other Asian nations outside China.

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