Feb. 02, 2001

Robust competition is awaiting Taiwan-based notebook computer makers, who are trapped in a tug-of-war of falling profits and the government's ban on relocation of high-tech industries to China.

Despite Taiwan's current ban, all Taiwan-based companies have set up production lines there to ready themselves for a change in the government's policy, industry sources point out.

Especially the chairman of the Acer Group, Stan Shi, wants regulators to hurry up with relaxed rules that will allow greater China investment.

"It's unreasonable to expect companies to go against the world trend and give up opportunities for profit on the mainland", he said in an article written for financial website Asiawise.com. "Today's unrealistic rules have lead to evasion and obfuscation", he wrote.

Shi said that rules were needed to help Taiwan's manufacturers to take best advantage of China's market and labor resources while turning Taiwan into a "knowledge-based" economy. In addition, he said that Taiwan had a bright future in areas such as design, marketing and services. It had no future in low-end, labor-intensive manufacturing.

In addition, slowing demand for personal computers is forcing the world's biggest computer makers such as Compaq and Dell to search for and expand to new markets. In turn, Taiwan's notebook computer makers, manufacturing on a contract basis for these giants, are facing ever tighter profit margins and demands by their major clients to move production to China.

While companies make their forecasts for 2001, most say that building new plants in Taiwan to increase capacity is proving increasingly difficult and expensive due to labor and land related costs, a worsening business environment and political deadlock, the American Chamber of Commerce in Taipei said in a recent publication, quoting the Chinese National Federation of Industries, whose chairman added that Taiwan's investment climate was not as favorable as before due to higher wages, shorter working hours, quota on foreign laborers and problems surrounding the construction of the Fourth Nuclear Power Plant, which the government cancelled in October while fighting for continuation goes on.

According to a recent report released by the Institute for Information Industry (III), Taiwan remained the world's No. 1 notebook maker in 2000, producing 12.1 million units worth US$ 13.55 billion, or 52.5% of the world total. It also shows that the local notebook sector became Taiwan's leading information hardware industry last year.

The report predicts that Taiwan-based notebook makers will produce a total of 15.63 million units in 2001, two million of which will already be made in China if the Taiwan authorities decide to immediately lift the manufacturing ban. Should that happen, around 10 million notebooks will be produced by "going west" of local firms in 2003, or 46% for of the Taiwan sector's entire production, the report pointed out.

Lin Hsin-yi, Taiwan's minister of economic affairs presented a report to the Cabinet last week, recommending a broad lifting of restrictions of trade with China.