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Taiwan sees chance to reclaim high-end industries lost to China

Taipei | Updated on November 19, 2019 Published on November 19, 2019

Taiwan sees the opportunity to revitalise its economy as a centre for advanced manufacturing, reversing decades of investment and know-how outflows across the Taiwan Strait, as the trade war forces technology suppliers to rethink their reliance on China.

Taiwanese companies have pledged to invest almost $39 billion at home since the government initiated a programme at the beginning of the year to attract investment from local companies with facilities in China, with a focus on high-end industries. The programmme is credited with helping the Taiwanese economy weather the US-China trade war better than its peers in the region, and Minister without Portfolio Kung Ming-hsin says the impact will be felt by the local economy for years to come.

Additional investments

“We will see additional annual investments of NT$300 to NT$400 billion a year over the next two to three years thanks to the return of Taiwanese companies,” Kung told Bloomberg News last Thursday. “We are confident that we will see solid growth momentum for the next three to four years.”

The plan to lure local companies to invest back home is one of two competing economic visions for Taiwan as voters weigh their choices ahead of the Jan. 11 presidential election. While incumbent President Tsai Ing-wen is pinning Taiwan’s economic future on developing industries such as advanced manufacturing, clean energy and defence domestically, her opponent, Han Kuo-yu of the opposition Kuomintang, advocates further removing barriers to doing business with China.

Shifting Production Taiwanese companies like Hon Hai Precision Industry, which makes gadgets for many of the top global electronics brands, began investing in China in the late 1980s, kicking off a transformation that’s made China the world’s factory floor. But faced with ongoing trade tensions and tariffs between Taiwan’s two biggest overseas markets, the leaders of those companies are increasingly shifting production to Taiwan and Southeast Asia to protect their wafer-thin margins. The government announced a record NT$70.1 billion investment in Taiwan by Hon Hai’s panel-making affiliate Innolux Corp. last week.

High-end networking gear

Taiwanese companies have moved facilities producing high-end networking gear, laptops, servers and bicycles back to Taiwan this year, while manufacturing of lower-margin products has gone to Southeast Asia, Kung said. The minister identified smart manufacturing and connected devices as new areas Taiwanese companies could compete in.

Despite the trade war taking a toll on growth in Asia’s export-dependent countries, Taiwan is on track for GDP to rise 2.5% this year. The island’s shipments to the US rose almost $4.2 billion in the first half of 2019, gaining from China’s loss of exports to America, a recent United Nations Conference on Trade and Development report noted.

Kung said that the government is readying land in southern Taiwan homecoming companies can begin moving into starting from 2021. Taiwanese officials are also working to expand an existing science park in southern Taiwanese city of Tainan and creating a brand new one in the neighbouring Kaohsiung city, Kung said.

“We will only have three to four years to reshape our industries, and the outcome will decide our future for the next decade or two,” Kung said. “We are planning to turn Taiwan into an advanced manufacturing centre because companies now are moving production of their premium products home.”

Published on November 19, 2019
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