Reshoring, Taiwanese style
27. March 2014
Proximity, as well as a common language and culture, made the Taiwanese among the first to exploit China’s potential as a manufacturing hub following the People’s Republic’s economic liberalization of the late 1970s. Today, however, as labor and land costs rise unabated on the mainland, Taiwanese companies are crunching the numbers before sending business 110 miles (180 km) across the Taiwan Strait.
When injection molding machine supplier Multiplas Enginery Co. Ltd., Taoyuan, Taiwan, looked to build a new plant to support its booming vertical press business, it considered China and Taiwan, but eventually settled on Taiwan.
“Now China's manufacturing costs are very, very high,” Multiplas Manager David Wu explained from his company’s existing Taiwanese plant, in the Hwa-Ya Technology Park in Taoyuan. “As a company we calculated the profit margin, looking at China and Taiwan, and Taiwan had a higher profit margin, so we decided to build the new plant here. I think this is a trend. Many companies see the cost issues in China—labor costs have been going up more than 20% per year.”
Multiplas, which specializes in vertical injection molding machines but is hoping to expand its reach in horizontal machines, operates a 25,000-m2 plant in Kunshan, China, as well as its original 8000-m2 operation in Taiwan. Work is currently underway on a brand new $50 million, 30,000-m2 plant 30 minutes away from its Taiwan headquarters.
The visit to Multiplas was arranged as part of a pre-Taipei Plas tour organized by the Taiwan External Trade Development Council (TAITRA). At other stops along the way, Taiwanese plastics machinery manufacturers, all of whom have operations in China, acknowledged the importance of the economic behemoth just off its shores but also indicated that a shift of sorts was underway.
Chen Hsong Group, which was founded in 1958 in Hong Kong and had its IPO there in 1995, has a massive presence in mainland China, with 14 different operations there among its various subsidiaries.
Aron Chao, sales director, for Chen Hsong’s Asian Plastic Machinery (APM) subsidiary, which was founded in Taiwan in 1980, acknowledged the ongoing importance of China, but noted a realignment, albeit small, as well. In 2012, Chao said 95% of APM’s machines were exported, with half of those exports headed to the mainland. In 2010, however, exports accounted for 90% of business, with the remaining sales staying in Taiwan as Taiwanese companies brought back some molding from China.
Back at Multiplas, on the topic of wages, the question of whether Taiwanese pay has also been on the rise was greeted unanimously with laughter from the Taiwanese in the room. The short answer, no, Taiwan’s wages have not been on the rise as they grow by double digits at its neighbor. For a low-level factory work, monthly wages were estimated to be less than $700/month and unchanged for the last decade plus.