In Taiwan, relocation goes through electronics

At the headquarters of Taiwan Semiconductor Manufacturing Co. Ltd (TSMC) in Tapei in 2014.
At the headquarters of Taiwan Semiconductor Manufacturing Co. Ltd (TSMC) in Tapei in 2014. Pichi Chuang / REUTERS

In Taiwan, “relocation” began before Covid-19: Taiwanese companies present in China for more than two years and affected by the Sino-American trade war have been entitled, since July 2019, to a support plan to reinvest in Taiwan if they do it in future sectors. This highly symbolic measure by the government of President Tsai Ing-wen, an ardent defender of the island’s sovereignty, reversed the dynamic of rapprochement with China of its predecessor and was one of the successes that contributed to his re-election in January 2020. .

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For the major Taiwanese electronics subcontractors, who invested massively in China in the 2000s to export to the United States, it helped loosen the grip on American sanctions: communication equipment and components electronics were taxed at 10% by the United States in September 2018, which increased to 25% in May 2019.

As a result, 189 Taiwanese companies received targeted aid as of May 21 for the equivalent of € 23 billion in investments in Taiwan – a welcome windfall, in an economy that suffered from industrial underinvestment. Taiwanese investment in China fell by half in the first ten months of 2019 compared to 2018.

Innovation sectors

In fact, most of these companies maintain production in China. It’s a big market for them, and it’s not so easy to get out of it, there can be all kinds of administrative hassles Said William Tang, a spokesperson for InvesTaiwan, the agency that serves as a window for repatriation applicants. Only a handful of companies have made their return plans public, so many the subject is sensitive. In addition to being directly impacted by US sanctions, applicants must invest in Taiwan in areas of innovation, such as the Internet of Things, intelligent engineering, the recycling industry and biotechnology.

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In exchange, the ” action plan to welcome businesses returning to Taiwan “Offers tax breaks, soft loans and guarantees, privileged access to government industrial zones, and the extension of the authorized quota for foreign workers from 25% to 40%. Nearly 700,000 young people in South East Asia work in Taiwan on renewable contracts every three years, up to twelve years – in conditions that can border on exploitation.

“It was very difficult to find land in Taiwan and the workforce. That’s why we went to China and we could grow Said Kevin Mar, a manager at Universal Microelectronics based in Taichung, the big city in the northwest, an hour from Taipei by high-speed train.

The company is a manufacturer of original equipment (OEM), that is to say products that buyers resell under their own brand – including radars for pleasure boats, electronic cards or blocks of power supply for computers. However, China is no longer as attractive as it once was: ” Costs started to climb in China in 2008. It has become difficult to find workers for our main factory in Shenzhen, from 6,000 to 1,000 workers. We opened two small factories in Fujian province, and we also have a factory in Vietnam “He said.

Synergy with Vietnam

In Taichung, where its headquarters are located, Universal Microelectronics has invested 13 million euros to build a new floor dedicated to R&D and acquire high-level robotics from Germany or Japan. ” Our American customers want our products to no longer be made in China. Some may collect an additional cost of 15% if it is done in Taiwan, which remains below 25% tax. For simpler products, they are offered to make them in Vietnam. It’s à la carte “Continues the framework.

Ultimately, the company hopes to see its exports from Taiwan drop from 10% to 15% of its sales in the United States, and those from China will drop below those from Vietnam. With Vietnam, synergies go both ways: Universal intends to increase the number of Vietnamese workers from 15% to 25% in Taichung, the most competent of whom can then take up positions of responsibility in its factory in Vietnam.

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Several big names in the Taiwanese electronic subcontracting are banking on an expansion in Southeast Asia, like Pegatron, which opened its first factory in Indonesia last year and plans a new one in Vietnam by the end of the year. Taiwan’s new attractiveness has convinced Apple to invest in Taiwan in the production of next-generation displays. As for the Taiwanese TSMC, a giant in subcontracting in semiconductors directly affected by the sanctions against the Chinese Huawei, he announced an investment of ten billion euros in the United States to provide live its American customers.

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