Many Taiwanese high-end electronics makers are shifting part of their production lines from mainland China back to the island to avoid tariffs and other restrictions from the United States.
Industry chains always chase the most cost-efficient destination. A large number of Taiwanese factories moved to the mainland in 1990s attracted by abundant cheap labor there. But these companies are now returning to Taiwan due to the escalating US-China trade war.
The administration of US President Donald Trump has imposed tariffs on Chinese goods and could ban the sales of chips and technology to China. That’s why many big manufacturers are shifting some of their production lines from China, or have plans to do so.
Meanwhile, China is gradually losing its cost advantage as labor cost has been spiking over the years.
Companies returning to Taiwan have invested NT$452 billion (US$14.55 billion) so far this year, according to the island’s Ministry of Economic Affairs.
They include big companies such as Merry Electronics Co. Ltd., AcBel Polytech Inc. and Cheng Loong Corp., which designs and manufactures packaging for Apple Inc.’s iPhones.
These companies have created over 42,000 jobs in Taiwan.
Still, Taiwan has a lot of work to do if it wants to attract not only Taiwanese firms but also foreign investors.
The island’s foreign direct investment has been lagging behind other Asian economies for a long time.
Foreigners often find it difficult to navigate the bureaucracy. Rules are not clearly laid out. For example, to build a factory, one needs a dozen approvals from different departments, and officials are not as efficient as investors want them to be.
All these have to change if Taiwan is serious about bringing in more outside investment.
This article appeared in the Hong Kong Economic Journal on June 22
Translation by Julie Zhu with additional reporting
[Chinese version 中文版]
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