Taiwan helps technology firms pivot production towards Southeast Asia as US tariffs hit mainland

Taiwan, home to many of the world’s leading electronics producers, is helping its manufacturers to expand beyond mainland China as increased US tariffs threaten the global technology supply chain.

US President Donald Trump’s decision to increase tariffs on US$200 billion of mainland Chinese imports last week will have convinced any undecided Taiwanese companies of the need to shift some production away from the mainland, Kung Ming-hsin, Taiwanese minister-without-portfolio in charge of economic affairs, said on Tuesday. After Taiwan, according to Kung, Vietnam and India were the next two preferred destinations for Taiwanese electronics companies.

“Taiwanese companies may bring production of key, high-value components back home, but assembly and mass production of gadgets will go to Southeast Asia,” he said. “Southeast Asian countries know there’s an opportunity here.”

Technology companies from Apple to Dell Technologies have long relied on mainland China’s immense labour force and manufacturing prowess to churn out everything from iPhones to computers. Now, the threat of punitive American sanctions, accusations of hardware spying and the rise of Southeast Asian economies have encouraged industry players to consider shifting at least some of their output away from the world’s second-largest economy.

Taiwan has been the primary beneficiary of that shift. Since the beginning of the year, 52 Taiwanese companies have pledged to invest around US$9 billion on the island as part of a government programme to persuade its companies with facilities in mainland China to take production home.

While there is little chance that the mainland will cede its mantle as the world’s electronics workshop soon, that trend is accelerating as Washington and Beijing clash in politics and business – and companies scramble to get out of the line of fire. That is splitting the global production chain from one centred on mainland China to a multipronged system with one based in the world’s second-largest economy and another that serves the US and other non-mainland markets, Kung said.

Despite a lack of formal diplomatic ties, Taiwanese officials are helping companies talk to governments across Asia about tax, subsidies and development of industrial zones, Kung said.

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But he and some of Taiwan’s biggest technology companies share the concern that Southeast Asia’s electronics manufacturing ecosystem still has some way to go before it can rival that of the mainland.

“If a product line is moving, the whole supply chain needs to move together. There needs to be a cluster,” Quanta Computer vice-chairman CC Leung said in Taipei on Tuesday.

Quanta moved most of its server motherboard production to Taiwan from the mainland last year, and it is expanding facilities in the US, but now it could face 25 per cent US tariffs on its notebooks if Trump goes ahead with his newest threat to target another US$300 billion worth of mainland-made goods.

“Right now, there is no consensus among the supply chain which Southeast Asia country would be best,” Leung said. “If manufacturers are spread out in different countries, transport costs will remain high. All our profits will go to logistics companies and local customs agencies.”