Taiwanese electronics manufacturers should further develop their research and development capabilities and logistics management if they want to thrive in the China market, a National Science Council report said yesterday.
The report indicated that the electronics industries on both sides of the Taiwan Strait are closely correlated, with 70 percent of Chinese electronics manu-facturers doing business directly or indirectly with Taiwanese counterparts.
Many Taiwanese electronics manufacturers have in recent years moved their production lines to China as manufacturers expand to take advantage of growing demand and lower manufacturing costs.
Taiwanese manufacturers' investment in China rose almost a third in the first half of the year, according to statistics provided by the Investment Commission under the Ministry of Economics. The nation's approved investment in China climbed 31 percent from a year earlier to US$2 billion, the commission said last month.
But as Taiwanese companies invest heavily in China, they have also created a potential rival across the Strait, as they helped develop a supply chain of parts and components for China's electronics industry, the report said.
In the past, electronics manu-facturers in China -- including Taiwanese investments -- used to source most electronic parts and components from Taiwan. With the establishment of an indigenous supply chain in China, electronics manufacturers there have gradually reduced their reliance on Taiwan, the report warned.
Noting that Chinese parts and components suppliers would grow stronger and thereby affect Taiwanese manufacturers to some degree, the report urged local electronics makers to upgrade their global logistics expertise -- including procurement, distribution, maintenance, inventory and replacement of material and personnel.
In a nutshell, the report said, Taiwanese electronics makers must maintain a low-cost manufacturing base and ensure shorter delivery times than their rivals if they wish to win orders.
President Chen Shui-bian (陳水扁) last week addressed the importance of information technology development and improving global logistics as the key to reviving the nation's economy. The president said the government should put more effort into reinforcing the nation's infrastructure through deregulation. He did not elaborate.
Meanwhile, the report said many China-bound Taiwanese manufacturers were expanding their businesses there while facing shrinking profit margins. As many Taiwanese manufacturers delivered their goods on behalf of international brands on an OEM (original equipment manufactur-ing) or ODM (original design manufacturing) basis, their profit margins were increasingly squeezed whenever global brands engaged in price wars, the report added.
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