Wiwynn Corp (緯穎), which makes cloud computing equipment, yesterday said it is evaluating the possibility of moving its plants in Mexico to the US to avoid possible US tariffs on Mexican goods.
US President Donald Trump on Thursday said that the US would impose a 5 percent tariff on all Mexican imports, effective on Monday next week, unless the country takes action to deter the flow of Central American migrants crossing into the US.
The tariff would be raised to 10 percent on July 1 and would be increased 5 percentage points each month until it reaches 25 percent in October if Mexico fails to fulfill the demand, the Trump administration has said.
Shares of Wiwynn, which has the highest revenue exposure to Mexico among its peers, fell 10.28 percent over the past two trading sessions to NT$323 yesterday.
“Wiwynn’s original equipment manufacturing capacity at its Mexico plants makes up 60 percent of its total server rack capacity, not 90 percent as some media reports have suggested,” the company said in a filing with the Taiwan Stock Exchange.
Products manufactured at its plants in Mexico’s tax-protected zones are primarily shipped to its data-center clients in the US, Canada and Latin America, the company said.
Wiwynn said it has communicated with its clients to deliver products ahead of schedule to avoid any tariffs.
It told its US clients that it would provide flexible capacity allocation at its plants elsewhere to fulfill their orders, the company said.
Microsoft Corp and Facebook Inc are the two biggest clients of Wiwynn, making up 90 percent of its total revenue.
“Wiwynn is closely monitoring the trade negotiations between the US and Mexico, and is cautiously evaluating the possibility of setting up a factory in the US,” the company said in the statement.
According to the US-Mexico-Canada Agreement, foreign companies in Mexican free-trade zones may seek tariff exemptions, Yuanta Securities Investment Consulting Co (元大投顧) said in a report on Sunday.
However, “if the US raises the tariff to 25 percent, we believe ODMs [original design manufacturers] will consider expanding capacity in other countries,” Yuanta analyst Carol Juan (阮辰靖) said in the report.
However, capacity expansion in Europe might increase labor and shipping costs, Juan said.
Delivery times might also be lengthened, which would increase pressure on manufacturers’ working capital, she said.
As a result, Juan expects “ODM companies to undertake further evaluation on capacity relocation, as doing so may not be time-effective or cost-effective” even in the worst-case scenario.
Among Taiwanese ODMs, Wiwynn and Inventec Corp (英業達) have higher capacities in Mexico.
Wiwynn generates 60 to 70 percent of its revenue from server racks assembled in Mexico, while Inventec generates 15 to 20 percent of its revenue from its Mexican plants, Juan said.
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