By Mr. Richard Lee, Chairman of TEEMA
Taiwan's Office of Trade Negotiation of Executive Yuan held an online meeting Dr. Gina M. Raimondo, Secretary of Department of Commerce of the US on June 8.
Several industry leaders were invited by the Office of Trade Negotiation to attend the meeting, including Mr. Richard Lee, Chairman of TEEMA. The following is the remark delivered by Chairman Lee at the meeting:
Thanks to Secretary Raimondo for your precious time. Thanks to Minister John Deng for his invitation.
Distinguished guests, ladies and gentlemen: My name is Richard Lee, Chairman of TEEMA which stands for Taiwan Electrical and Electronic Manufacturers Association.
TEEMA was founded 73 years ago in 1948. With more than 3,000 member companies, we represent and serve all the electrical and electronics manufacturers in Taiwan,
in other words, the fully integrated ICT manufacturing industry, from semiconductors, various electronic parts to Smart Phones, PCs and Servers. The total revenues of Taiwan's ICT manufacturing industry account for about one half of Taiwan's industrial output as well as about one half of Taiwan's exports.
Since the 1990s, almost all of our member companies, except semiconductors, have established their manufacturing bases in China and have benefited from China's abundant labor force and low cost structures.
Starting from 2018, the situation has drastically changed due to the great impact of the US-China trade war. This has accelerated the shift of Taiwanese ICT factories away from China.
AT Kearney Annual Report
According to AT Kearney's 8th annual Reshoring Index Report, which was released on April 27th , about 6 weeks ago, U.S. Reshoring Index turned negative for 2020, following a record high in 2019. Despite the net offshoring result, U.S. executives still express favorable views toward reshoring: more than 52％ say they are increasing sourcing of U.S. products as a response to pandemic disruptions, while 17％ are increasing sourcing from Mexico and Canada （due to USMCA）; nearly half （47％） of U.S. executives said they will aim to reduce dependency on single-country sourcing over the next three years with 41％ identifying a reduction of dependence on China.
The movement of Taiwan ICT manufacturing industry is expected to respond to AT Kearney's report. The shift of Taiwanese ICT factories from China is an on-going
trend and will further reduce to around 60％ dependency against the total production. Of those shifted from China, they either moved back to Taiwan or moved to other Asian Low-Cost Countries, in particular Vietnam, Thailand and India, increasing to around 25％ of the total production. Of those shifted from China, a great portion moved to Mexico （for US market） and East Europe （for EU and UK markets） increasing to around 15％ of the total production.
At the same time, Taiwan ICT manufacturing industry echoes AT Kearney's opportunities and challenges to bring industry back to the US:
1） Kearney forecasts potential difficulty in the coming years for manufacturers attempting to source foreign high-tech commodities like computer chips, especially in places like the U.S. and Europe. This explains why TSMC had a ground-breaking last week in Arizona to build their 12 billion U.S. Dollar brand new foundry for U.S. local consumption.
2） Kearney also expects localized supply chains to be a greater focus in the coming years, as reshoring or "near-shoring" offer supply chain resilience benefits and greater opportunities to monitor environmental and labor standards compliance. This explains why the shift of Taiwanese ICT factories "near-sharing" to Mexico has been increasing.
3） Kearney sees potential for a wave of post-Covid-19 M&A activities as businesses that continued to thrive during lockdowns or with significant cash reserves eye
long-term growth opportunities. Taiwan has performed well during Covid-19, many Taiwanese ICT manufacturers are cash-rich and are eyeing M&A opportunities in the
US. This explains why Taiwan has consecutively been the largest delegation participating in Select-USA in the last three years.
Wish you all the very best and thank you.
