Taiwan-based notebook ODMs have completed most of their plant relocation and their present focus is to improve production yield rates and reduce costs at the relocated facilities in a bid to retain clients, according to industry sources.
It remains to be seen whether China-made notebooks will be subject to US tariffs come December 15, but so far only Hewlett-Packard (HP) and Dell have been keen on placing orders for notebooks to be produced outside China, the sources said. Most other notebook brands have yet to commit their production to the relocated plants, awaiting the outcome of the US-China trade talks, the sources noted.
But brand vendors have recently started demanding their ODM partners make efforts cutting their non-China production costs to levels even lower than those in China, the sources said.
Most brand vendors have expressed willingness to subsidize their ODM partners in relocating production lines, but that does not mean that they no longer care about production costs. They will still evaluate ODM partners' production costs when considering where to place their orders, and they are likely to make decisions according to pricing, the sources said.
In Taiwan, production costs are higher compared to those in Southeast Asia countries, while a lack of labor is also an issue. But the production quality is better in Taiwan, which also has an advantage from its comprehensive components supply chain, the sources said.
Although Southeast Asia countries have lower labor costs, worker management is a rather difficult for Taiwanese ODMs because of language barriers and different working cultures - neither of which is much of a problem running production in China, the sources noted.
At the moment, ODMs have mainly shifted their production of network communication devices and equipment to Vietnam, Taiwan and Indonesia as they are nearer the supply chain in China.
ODMs' server production has mostly been moved to Taiwan and Mexico. Foxconn, Inventec and Wistron have established plants in Mexico to serve their US-based clients.
The notebook production lines have been relocated primarily to Taiwan, Vietnam and the Philippines with Taiwan being the most popular choice. Quanta Computer and Compal Electronics both have plants in Taiwan, while Wistron also has a factory in the Philippines. However, clients at the moments are mainly placing US-bound orders with production lines in Taiwan and Vietnam and have not yet given any to the ones in the Philippines.
Quanta has also recently announced to invest NT$1 billion (US$32.55 million) to establish a subsidiary in Thailand and purchase a new factory locally.
Several Taiwan-based network communication product makers including Sercomm and Accton, are set to expand their capacity in Taiwan, while white-box server player Quanta and Wiwynn are also planning to do the same with Wiwynn's production lines in southern Taiwan to enter volume shipments by the end of 2019.
Article translated by Joseph Tsai
