Toshiba's plan to manufacture notebook PCs in China will increase pressure on the Taiwan government to let local manufacturers follow suit, say industry observers.
Foreign companies, such as Toshiba, order billions of dollars worth of notebook PCs from Taiwanese manufacturers every year. The Japanese company's new factory, near Shanghai, will take advantage of lower labor costs, and better access to the growing local market -- both benefits that are denied to Taiwanese manufacturers by the island's own government.
Government restrictions on technology transfer and investment prevent Taiwan's notebook vendors from manufacturing in China.
"I think increasingly the restrictions will be lifted, especially after the election next March," said Christine Lee, a notebook industry analyst at Merrill Lynch in Taipei.
"We don't know if other foreign companies will also start manufacturing in China," said Henry Wang (
He conceded that if initial ventures like Toshiba's were successful, others would follow.
Analysts agreed with Wang that making notebooks in China may not be as simple as it seems. Taiwan, which makes almost half of the world's notebook PCs, has an established components supply chain. Key notebook components, such as LCD screens, are increasingly being made on the island.
Lee pointed out that initial production at Toshiba's Shanghai plant would be quite low, compared to Taiwanese manufacturers' output. It will make about 110,000 notebooks next year, rising to 370,000 in 2004, according to Toshiba.
Acer's planned output next year is 2.5 million, said Wang.
Toshiba, which has traditionally made its notebook PCs in house, has recently begun outsourcing some work to Compal (
According to Japanese press reports, Toshiba's Chinese factory will manufacture models from its full range of notebook computers, possibly including products similar to those made by Compal.
Set to begin operations next April, the Shanghai factory, situated in a high-technology park in the Pudong (浦東) zone, is 90 percent owned by Toshiba or its subsidiaries.
Taiwanese companies are making plans for the day when government restrictions are lifted.
"If the government changes its policy, we may set up notebook production in China," predicted Acer's Wang.
One of Acer's competitors, Twinhead International (
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