Jun 27, 2013

    Taiwan firms bringing factories home

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

    Iteq, which makes materials that electronics companies need to build circuit boards, is installing equipment as part of a NT$2-billion (S$84-million) refurbishment, to begin production by the end of next year, said Mr Eric Liu, head of investor relations.

    It will be the company's first new factory in Taiwan since 1998. Iteq began moving work to Guangdong in southern China in 2002.

    "People went to China because the costs were lower," he 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, bicycle-maker Giant and contact-lens maker Ginko International are among companies tapping Taiwan's pool of engineering talent, as China'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.

    "The move to make it easier and attractive for Taiwan companies overseas (to return), especially those with higher value added, is a positive step that will ensure the economy stays on a sustainable growth path," said Mr Tony Phoo, a Taipei-based economist at Standard Chartered.

    Bringing factories home is "one way to kick-start the economy", he 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 estimated. Taiwan expects to woo about S$6.4 billion from companies moving back this year.

    In the seven months since the President's tax and labour measures took effect, at least 34 companies, including camera-lens maker Largan Precision and tyre producer Kenda Rubber Industrial, have filed proposals to invest NT$182.6 billion on the island.

    That's more than triple the amount for 2011, the Economic Affairs Ministry said.

    The government estimated that returning companies will bring back more than 28,000 jobs over three years.

    "We're hoping to sell Taiwan-made products to China," said spokesman Huang Chiao-ju.

    Giant, which began investing in China 20 years ago, is building a new headquarters and research-and-development centre in Taichung, central Taiwan.

    When it's completed in three years, the company will increase production of its top-end models at its factory, said chief executive Antony Lo.

    "It's not economical any more to make high-end bicycles in Kunshan" in China's Jiangsu province, he said in an interview in Taipei. "Taiwan has talents and artisans with good skills. It's hard to find (such) people in China."