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Taiwan Hardware Firm Executive: the Future is in India

Taiwan Hardware Firm Executive: the Future is in India

Source:Chien-ying Chiu

With the US-China tech decoupling accelerating, a Taiwan tech company boss predicts that China will experience an avalanche of supply chain departures, and that an exodus of hardware manufacturers to India will happen in 3 years. Why did he say that?

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Taiwan Hardware Firm Executive: the Future is in India

By Elaine Huang
web only

Confessions of a Taiwan-based Hardware Industry Executive: the Future is in India

If 30 percent of the supply chain leaves, China could face an avalanche of departures.

Looking at U.S.-China relations, though Trump has lost the election, “Trumpism” will not go away. As for Biden’s approach, I predict that it will consist of a great deal of political lip service combined with technological stonewalling.

AIT has had numerous visits with us. It used to be that interaction between AIT and Taiwanese industry just consisted of good wishes around the holidays and handshakes all around.

Recently, however, they began asking more detailed questions. This came as quite a shock, as the questioning went so far as to cover arrangements in the U.S. and India, as well as in China.

Later, AIT held a forum to discuss decoupling, essentially talking about the reordering of the global supply chain. The U.S. would like Taiwan to be a key partner in the reshuffled worldwide supply chain.

Before Trump was in the picture, complete reorganization of the supply chain was never carried out. Now, if it were to be carried out to the fullest, China would fall behind within three to five years due to its insufficient scientific foundation.

Therefore the U.S. and China’s decoupling will continue during the Biden era, as America’s fundamental competitiveness is at stake.

Looking at India, which AIT is interested in as a destination for Taiwanese businesses leaving to go further afield, everyone dragged their heels for five or six years about whether to head to India. However, they have taken off like gangbusters over the past six months. 

Before, India required that those looking to set up manufacturing in India submit documents for review, which generally took three to six months. However, now one can use the “green lane”, getting approval in just a week. Taiwanese manufacturers have not made definitive commitments for fear of provoking China’s ire, but the Indian government is quite aggressive.

For its part, Apple has already begun to take action. Apple was never as aggressive before, but it has been over the past six months. Naturally, this can be connected to the Trump administration’s desire that Apple do something. Accordingly, as far as moving the supply chain, this will not let up during the Biden administration.

To be honest, rationally speaking, everyone should have planned to gradually make an exit from China three to five years ago due to such factors as high wages, an aging population with a low birth rate, and increasingly strict laws. However, the situation was one under which you would not make a move, and I would not, either, and what was needed was a loose thread that would make everything unravel. And that thread is usually customers.

For example, when HP decided to set up shop in Chongqing, the entire supply line moved there to follow the business. This created a powerful incentive, so that instead of five years, it was compressed to two or three years. At this time, it seems as though the U.S. government policy is behind this powerful force.

The key is that, if more than 30 percent leave, China will experience an avalanche of departures. The reason is that when the first 30 percent relocate, the local supply chain gets built up, and given China’s high costs, why would businesses stay in China?

However, only heading to Southeast Asia is a flawed strategy. If not for India’s involvement, no country in Southeast Asia could replace China’s 1.4-billion population. If it were N+1, then the statistics for any Southeast Asian country + India’s nearly 1.4-billion population would far surpass China, especially given the affordable wages. Basic wages in China are around NT$10,000 per month, which is five times higher than India.

This is why, if moves are made in 2020, there will be a major pivot by 2023. If the supply chain settles down in Southeast Asia within three years, it could trigger an exodus from China.

This echoes the sudden move of Taiwan’s notebook computer supply chain to China in 2001. ASUS was the slowest to respond, as it operates its own brand and manufacturing, for higher margins. However, by 2003, no one could resist setting up manufacturing in China, because even to buy a mold, one had to go to Shanghai or Kunshan, as they were no longer obtainable in Taiwan.

Things come and go, and events run in cycles. The year 2023 could end up looking like 2003, where businesses cannot afford to set up shop once the supply chain is in place.

However, the supply train is not actually that efficient, as it is multinational. And brands must adjust to supply chain changes of direction.


Have you read?
♦ The Power of Taiwan’s Silicon Shield: Will It Hold in Biden Era?
♦ Australian Representative Gary Cowan: Taiwan is Recognized as More Important than Before
♦ Richard Bush: Biden's Taiwan Policy would be More Predictable

Translated by David Toman
Edited by TC Lin
Uploaded by Penny Chiang

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