Bringing it all back home

For eight years, the former Taroko Textile Corp factory in Hsinchu county, Taiwan, has been empty, a victim of the migration of manufacturing to the mainland. Now, as the supply of cheap labour wanes across the strait, work is returning.

ITEQ Corp, which makes materials that electronics companies need to build circuit boards, is installing equipment as part of a NT$2 billion (HK$515 million) refurbishment to begin production by the end of 2014, said Eric Liu, the company's head of investor relations. It will be ITEQ's first new factory in Taiwan since 1998. ITEQ began moving work to Guangdong in 2002.

"People went to China because the costs were lower," Liu said. "But labour costs there have been rising over the past few years. We're returning to Taiwan also because of the good supply of skilled workers."

ITEQ, the bicycle maker Giant Manufacturing and the contact lens maker Ginko International are among companies tapping Taiwan's pool of engineering talent as  the mainland's labour supply tightens and rising costs force manufacturers to make more sophisticated products. They are being encouraged by Taiwanese President Ma Ying-jeou, who has introduced tax cuts and other incentives in an effort to boost wages as his popularity slumps.

Tony Phoo, a Taipei-based economist at Standard Chartered, said: "The move to make it easier and attractive for overseas Taiwan companies, especially those with higher value added, is a positive step that will ensure the economy stays on a sustainable growth path." Bringing factories home is "one way to kick-start the economy", Phoo said.

Private investment will reach a record NT$2.3 trillion this year, up from NT$1.6 trillion in 2009, even as a global slowdown hurts exports, the Statistics Bureau estimates. Taiwan expects to lure about US$5 billion in 2013 from companies moving back. Last year, Taiwanese government-approved investment on the mainland fell to US$12.8 billion, from US$14.4 billion in 2011.