Taiwan Hi-Tech Firms Relocating to China's Mainland

A new wave of relocation to the Chinese mainland has simmered among Taiwan-based hi-tech firms since the end of last year, according to reports reaching here from Taipei Thursday.

This fresh fever of "landing on" the mainland has been conducted according to a new model under which Taiwan businesses move their entire "supply chain" to the other side of the Taiwan Strait, fueling the establishment of "special zones" there, the reports said.

A recent survey carried out by the Taipei Computer Association of 411 local firms showed that 30 percent of the firms questioned said that they had ventured into the mainland, with a vast majority of the remaining 70 percent admitting that they are planning to do so within one year.

The survey results indicate that most of the hi-tech firms based in Taiwan are considering "going west," with their capital flight and relocation pace and scale accelerating each time. The notebook computer industry will be a major index of Taiwan's mainland investment fever, the reports said.

Taiwan remained the world's largest notebook producer in 2000, putting out 127 million units worth a total of 13.58 billion U.S. dollars. However, affected by a global slowdown in demand for personal computers last year, net profits for Taiwan-based notebook companies have fallen below 10 percent, pushing local manufacturers to find other means to reduce operation costs in a struggle for survival.

Quanta Computer, Taiwan's leading notebook firm and the last one to join its local counterparts' move to relocate to the mainland, decided late last year to branch off to the mainland by leasing plants in the Sungjiang Export Processing Zone (EPZ) near Shanghai with an initial investment of 26 million U.S. dollars, out of fear that it was losing its competitive edge over its rivals.

For many local parts and components suppliers, moving to the mainland is a natural step, as many of their clients have already done so, while there is the added attraction of the vast mainland market.

Enlight Corporation, which has already started production of computer cases in the mainland, has also adjusted its operation approach there by forging a "business alliance" with First International Computer, one of its clients, rather than manufacturing on its own.

Such a "cloning" pattern has created a much better-integrated service line for First International in the mainland, while Enlight is planning to promote a similar model in Shanghai in cooperation with other clients there.

For many Taiwan-based parts and components suppliers, their relocation to the mainland is based upon the needs of customers, local analysts observed, adding that pushed by important customers and their large orders, suppliers have gradually "clustered" in different types of "special zones" in the mainland amid this recent relocation fever.

Taiwan-headquartered notebook companies, including Compal, First International, Twinhead International and Mitac Technology Corp., have all chosen to set up their strongholds in the Kunshan EPZ, which industry sources say will immediately become the first- ever "notebook special zone" in the mainland as soon as Taiwan lifts its ban.

Taiwan firms which have joined in the recent exodus have noticeably relocated more northward and have acted "collectively," rather than "fighting alone" as in the past, industry observers said, warning that the amount of capital channeled into the mainland amid this relocation wave will be much higher than before.






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