Semiconductor M&A Accelerates in 2019
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A boatload of Taiwanese tech companies who moved their production operations to China decades ago are now sailing home. But the reason for this return voyage isn't what you might think.
In the past four months alone, 40 Taiwanese companies with significant operations in China have decided to leave the mainland. The movement, sometimes described in Taiwan as “the salmon run,” hardly amounts to an exodus. Yet, it is a milestone for Taiwan after more than fifteen years of its government trying to lure these firms back from China.
Those who announced their departure from China have pledged to invest more than NT$200 billion (US$6.47 billion) in Taiwan, according to the Ministry of Economic Affairs in Taipei. More firms are expected to follow, the Ministry said. Meanwhile, more companies are suspected to have already returned – without fanfare.
The most common narrative is that the U.S.-China trade war has trigged this phenomenon. Punitive tariffs imposed on Chinese manufactured goods by the U.S. government are forcing companies with factories in China to face revenue losses.
Tariffs, however, are more likely just a handy cover story for firms who were already planning to leave China, revealed several high-level industry executives and government officials in Taipei recently interviewed by EE Times.
Instead of seeking a quick fix for what might be short-term political tension between China and the United States, Taiwan companies in China have long seen the handwriting on the wall.
They explain that the real forces behind their return are the worsening business environment in China. The issues include rising labor costs, the burden of paying for rapidly increasing social welfare outlays and environmental taxes.
“Unless you are as big as Foxconn, most small and medium-sized Taiwanese companies in China can’t possibly meet China’s ever-growing demands,” Paul Chou, secretary general of Taiwan Telematics Industry Association, told EE Times.
Finally, not the least among Taiwan’s concerns is a growing political and social fear about the mainland. For example, many Taiwanese find China’s social credit system – under which China rates its own citizens, including their online behavior – particularly jarring.
Fueling Taiwan’s angst further is China’s approval last year to remove its two-term limit on the presidency. The new political system allowing Xi Jinping to remain in power for life is another sign – in the eyes of Taiwanese companies – that China is developing an unfriendly business environment, EE Times’ Taipei sources noted.
In other words, this is not so much about Donald Trump, but it's about Xi Jinping.
For the rest of this article, please see EPSNews' sister publication EETimes
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