Taiwan’s iconic high-tech sector is drifting towards India, Thailand and Vietnam to hedge political risks

Mindful of migration risks, Taiwan-based Acer, the world’s fifth-largest PC supplier by market size, expanded its influence in India last year by licensing its name to a local startup.

The 48-year-old company is watching other players in Taiwan’s technology equipment supply chain shift some of their production to other countries, according to Chief Operating Officer Jerry Kao.

“The supply chain is already moving out of Taiwan,” Kao said on the sidelines of the Computex Taipei 2024 technology show in early June. “They go to Vietnam, Thailand or somewhere else. We follow the trend.

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“As long as we see some risk, we will start to diversify. We have local assemblies in countries like India and Indonesia, so if something is wrong, we can move to these factories.

Acer – which has 7,725 employees and revenue of NT$241.31 billion last year – joined other major Taiwanese technology makers in what analysts saw as a shift towards South and Southeast Asia over the past few years , instead of deciding to expand in the country or other countries. Mainland China.

We will not withdraw from China, but we will add Southeast Asia or South America

James Hsieh of AcBel Polytech

For the past 40 years, Taiwan’s $130 billion technology industry has supplied the world with desktop computers, phones and other consumer electronics and their components. For example, Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest contract chipmaker.

“When it comes to notebook (computer) manufacturing, Vietnam and Thailand are currently the two most favorable countries due to lower labor costs, improved infrastructure and a growing domestic market,” said Sanesha Huang, an analyst at Taipei-based research firm TrendForce.

“India is also becoming more attractive due to its huge talent pool… as well as the government’s incentive policies.”

Taiwan’s technology sector is facing global political changes since the trade war between mainland China and the United States that began in 2018.

U.S. regulations currently prohibit Taiwanese companies that sell sensitive parts to American customers from doing the same in mainland China. At the same time, Taiwanese tech giants have diversified production outside Taiwan to hedge against conflict with mainland China that would make it more difficult for foreign customers to access these parts.

Some operators say these customers may ask their Taiwanese suppliers to relocate to avoid geopolitical risks and reduce shipping costs.

“Every customer likes to have a lot of different manufacturers in different locations,” said James Hsieh, assistant vice president of AcBel Polytech, a PC power supply development company. AcBel has a factory in China and is looking for new investments in Southeast Asia. “We will not withdraw from China, but we will add Southeast Asia or South America.”

Sysgration, a 47-year-old Taiwanese automotive electronics system designer, is studying how to start a business in Vietnam, according to senior product manager Tony Wang. He said the company, which has more than 600 employees, already has two plants in mainland China and a factory in the U.S. “in case (American) customers don’t allow us to export to (mainland) China.”

“If customers want the product to be made in (mainland) China, we can make it in China, and if they want the product to be made in the U.S., we can make it in the U.S.,” Wang said, noting that the China-Vietnam border would ensure “geographic dividend” for shipments.

Before 2018, Taiwanese companies usually chose to work in mainland China. The continent offered relatively cheap land and labor, a solid supply chain, and a large domestic market for selling products.

Several thousand Taiwanese companies from various sectors operate on the mainland. After 2019, they moved $60 billion worth of investments back to Taiwan, the island’s former economic affairs minister Wang Mei-hua told a U.S. think tank forum two years ago.

More than 70 percent of Taiwanese companies surveyed in the Center for Strategic and International Studies’ 2022 survey said Taiwan must reduce its economic dependence on China, citing the risks posed by a potential U.S.-China or cross-strait conflict.

Vietnam is valued for its low costs and new transport infrastructure. According to Taiwan’s Investment Review Department, Taiwanese have been investing in the country for about 15 years and have been approved to invest $1.23 million there between January 2023 and April this year.

Last year, Taiwan-based Quanta Computer signed a deal to start production in Vietnam, and iPhone assembler Foxconn Technology was already there.

Thailand is known for its production infrastructure, pro-investment policy and skilled workforce. By mid-2023, Taiwanese electronics companies have received approval for 20 projects with a total investment of 30 billion baht ($816 million), according to the Bangkok Post.

Across industries, Taiwanese have secured approval from their government to invest $959.82 million in the country from 2021 to April this year, up from annual amounts of no more than $70 million in all previous years.

India is attracting attention for its large, young and rapidly growing market, large labor force and investment protection pact with Taiwan. According to Taiwanese magazine Topics, around 150 Taiwanese companies operated in India last year, including top electronics companies such as assemblers Foxconn, Wistron and Pegatron.

Taiwanese have been approved to invest $5.6 billion in India in 2023 and the first four months of this year, compared with $2.8 billion in full-year 2021 and 2022 combined, according to data from the Investment Review Department.

Companies with small staffs and limited product lines often simply stay in Taiwan, according to executives exhibiting at Computex Taipei this month. Staying local helps “control quality,” said Gary Hsu, manager at Guanghsing Industry, a computer case designer.

Companies with factories in mainland China are not always willing to leave. The market size remains unchanged, as does the vibrant supply chain. Mainland suppliers sell some electronic parts at “low prices” that are harder to find in Taiwan, according to Angela Huang, an analyst at the Taipei-based Market Intelligence & Consulting Institute.

Investments approved for mainland Taiwanese companies reached about $3 billion in 2023, a 22-year low.

“Recently, China has been competing aggressively on low prices, which has prompted Taiwanese brands to outsource some of their core products to Chinese original design manufacturers to reduce production costs,” said Angela Huang.

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