Taiwanese factories moving to Taoyuan as China-US trade war heats up

Taiwanese companies are shifting their production to Taoyuan to gain relief from tariffs as the China-US trade war intensifies

Taoyuan Exhibition Center. (Image from travel.tycg.gov.tw)

Taoyuan Exhibition Center. (Image from travel.tycg.gov.tw)

TAIPEI (Taiwan News) -- As the trade war between the U.S. and China looks to continue to ramp up, Taiwanese tech companies are starting to pull out of China and shift production to the northern Taiwanese city of Taoyuan, according to a report by Bloomberg.

Though Taoyuan had suffered from a flight of industries to China over the decades, like the rest of Taiwan, the trend appears to be reversing as Taiwanese companies scramble to try to dodge current and potential future tariffs on tech gadgets made in China. Many Taiwanese companies are choosing Taoyuan because of the proximity of Taiwan's largest international airport, the Taiwan Taoyuan International Airport, and existing facilities at their disposal.

Three major Taiwanese tech suppliers, including iPhone assembler Pegatron Corp (和碩), laptop maker Compal Electronics Inc. (仁寶), and Apple Supplier Inventec (英業達) are all shifting manufacturing to Taoyuan, according to Bloomberg. Meanwhile, Quanta Computer Inc. released a statement earlier this month about the company’s decision to acquire an 11,000-ping property in Taoyuan’s Guishan District, adjacent to its headquarters, at a price of NT$4.28 billion (US$137 million) from a subsidiary of CENPRO Technology (中環科技).

Quanta is not only moving its supply chain of high-end products back to Taiwan, but the company is also shifting its focus to the development of consumer products in areas of smart medical care, smart manufacturing, and smart household along with the establishment of a new AI research center, announced company Chairman Barry Lam (林百里) earlier this month.

In an interview with the Wall Street Journal, Trump indicated that if a deal cannot be had with Chinese President Xi Jinping at the G20 summit in Buenos Aires this Friday and Saturday, he is willing to slap tariffs on the remaining lot of $267 billion Chinese products imported into the U.S. He also said that Americans could "very easily handle" a 10 percent tariff on Apple products imported from China.

Because 15 of the 20 largest exporters from China to the U.S. in 2016 were run by Taiwan companies, according to Chinese customs data cited by Bloomberg, they will feel the bite of the tariffs and seek the quickest way to gain relief.

Taiwanese companies will seek to shift their production away from China to avoid the tariffs and because building new plants from scratch would require a massive investment, many are finding their home base in Taiwan to be safe havens. "There are still a lot of uncertainties surrounding a trade war, so companies tend to first add capacities in their existing facilities in Taiwan instead of spending a lot to build new plants,” said Barclay economist Angela Hsieh to Bloomberg.

Elton Yang, chief financial officer of Quanta, which is based in Taoyuan, echoed this sentiment when he told reporters on Nov. 13, "The fastest way is to add capacity in existing facilities. Looking for new land and building new facilities elsewhere will be too slow."

Seeing the opportunity to lure Taiwanese firms back to the city as the trade war heats up, Taoyuan officials have been collaborating with real estate agents to help Taiwanese companies find land. The report cited officials as saying that there were 30 percent more companies seeking help in finding land from the start of the year to September.

From January to September, Taoyuan sold more industrial land and factories than any other city in Taiwan, according the Taiwanese real estate firm Sinyi. Sinyi manager Michael Wang told Bloomberg that more land is available in Taoyuan and it is easier to acquire than Hsinchu, while being cheaper than Taipei.