Mon, Sep 24, 2018 page16

• Asian firms shuffle production out of China

  • Reuters, SEOUL and TOKYO
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  A growing number of Asian manufacturers of products ranging from memory chips to machine tools are moving to shift production from China to other factories in the region in the wake of US President Donald Trump’s tariffs on Chinese imports.

  Companies, including SK Hynix Inc of South Korea and Mitsubishi Electric Co, Toshiba Machine Co and Komatsu Ltd of Japan, began plotting production moves from July, when the first tariffs hit, and the shifts are now under way, company representatives and others with knowledge of the plans said.

  Others, such as Taiwanese computer-maker Compal Electronics Inc (仁寶) and South Korea’s LG Electronics Co, are making contingency plans in case the trade war continues or expands.

  The company representatives and other sources spoke on condition of anonymity because of the sensitivity of the issue.

  The quick reactions to the US tariffs are possible because many large manufacturers have facilities in multiple countries and can move at least small amounts of production without building new factories.

  Some governments, notably in Taiwan and Thailand, are actively encouraging companies to move work from China.

  The US imposed 25 percent duties covering US$50 billion of Chinese-made goods in July, and a second round of 10 percent tariffs covering another US$200 billion of Chinese exports is to come into effect today.

  The latter rate is to jump to 25 percent at the end of the year, and Trump has threatened a third round of tariffs on US$267 billion of goods, which would bring all of China’s exports to the US into the tariff regime.

  At SK Hynix, which makes computer memory chips, work is under way to move production of certain chip modules back to South Korea from China.

  Like its US rival, Micron Technology Inc, which is also moving some memory-chip work from China to other Asian locations, SK Hynix does some of its packaging and testing of chips in China, with the chips mostly made elsewhere.

  “There are a few DRAM module products made in China that are exported to the United States,” said a source with direct knowledge of the situation, referring to widely used DRAM chips. “SK Hynix is planning on bringing those DRAM module products to South Korea to avoid the tariff hit.”

  Most of SK Hynix’s production would not be affected, the source added, since China’s dominance in computer and smartphone manufacturing makes it by far the largest market for DRAM chips.

  Toshiba Machine Co said it plans to shift production of US-bound plastic molding machines from China to Japan or Thailand next month. The machines are used for making plastic components, such as automotive bumpers.

  “We’ve decided to shift part of our production from China because the impact of the tariffs is significant,” a spokesman said.

  Mitsubishi Electric, meanwhile, said it is in the process of shifting production of US-bound machine tools used for metal processing from its manufacturing base in Dalian, in northeast China, to a Japanese plant in Nagoya.

  In Taiwan, an executive at Compal, said the trade war’s effect has been limited so far, but the company is studying its options.

  “We can also use facilities in Vietnam, Mexico and Brazil as alternatives,” the person said. “It won’t be easy because our majority production is in China; no other country can replace that at this moment.”

  Some Asian governments hope for an economic and strategic boost from the US-China conflict.

  The Taiwanese government is actively encouraging companies to move production out of China, pledging last month to speed up its New Southbound Policy to reduce economic reliance on China by encouraging companies to move supply chains to Southeast Asia.

  Bureau of Foreign Trade Deputy Director-General William Liu (劉威廉) said that the trade war presents “a challenge and an opportunity” for Taiwan.

  Taiwan depends on China as an export market, but could see a boost in jobs from companies moving operations back home, he said.

  Thailand also hopes to benefit from the “flow of technology and investment leaving China during the trade war,” said Kanit Sangsubhan, Secretary-General of the Eastern Economic Corridor (EEC) Office of Thailand, which is coordinating a US$45 billion project to attract investment into the country.

  The EEC last month took about 800 Chinese company representatives on a tour of its industrial heartland, and the Thai Board of Investment had seven roadshows in China this year to woo investors.
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