By Lorraine Luk
From China Real Time:
The recent spate of suicides at a Shenzhen factory of Taiwanese electronics maker Hon Hai Precision Industry, which assembles Apple products, has spurred the company, its Hong Kong listed Foxconn International unit and even some of its rivals like TPV Technology to give salary increases for factory workers in China amid growing concerns about working conditions at their plants.
Such a move raises the prospect that rising inflation and production costs in Shenzhen, one of China’s main manufacturing hubs, could prompt global consumer electronics makers to look at other destinations such as Vietnam, India and Indonesia as well as poorer inland provinces in China itself, such as Hubei and Chongqing, and to choose to manufacture products there in the future.
Taiwan Electronic and Electrical Manufacturers’ Association Vice President Luo Huai Jia said Monday the organization, which represents the interests of electronic manufacturers on the island, is encouraging Taiwanese electronics makers to build new facilities in cheaper Asian countries such as Vietnam, India, Indonesia and Malaysia, because of rising wages in China.
In 2007, Hon Hai, which assembles iPods and iPhones for Apple, began to build a new production base in Vietnam to help mitigate rising labor costs in China. Hon Hai also has production facilities in inland China, such as Wuhan in Hubei province and Langfang in Hebei province. Compal Electronics, which makes notebook PCs and other electronics for big brands like Hewlett-Packard and Dell, has already completed construction of a notebook manufacturing facility in Vietnam recently, says spokesman Chihming Chang, although mass production hasn’t yet started from the facility.
Chang says more than 80% of Compal’s production is conducted in China currently. Apart from the new site in Vietnam, the company only has a small plant in Brazil.
TPV, which supplies computer makers such as Dell, Sony and flat-screen TV makers Vizio and Philips, said relocating production facilities from China to cheaper locations such as Vietnam is a global trend. But for now the company is wary of relocating due to political instability and lack of skilled workers in Vietnam and Indonesia.
“Since most of our production facilities are based in China and they are close to suppliers of components, the costs of relocation would be huge,” said TPV investor manager Vijo Lee.
While “Made in China” electronic products may still be dominant in the next few years, it wouldn’t be a surprise if “Made in Vietnam” or “Made in Indonesia” become more prevalent with improving economic systems and infrastructure in these developing Asian countries.