Taiwan high-tech jobs to China: Fact vs
fiction By Mac William Bishop
TAIPEI - Of all the policy problems that
President Chen Shui-bian's administration faces, the
most intractable is the flight of jobs and investment
across the Strait to mainland China. However, this issue
is more a public relations challenge than a real problem
for the island's economy, so far.
Taiwanese
officials have gone so far as to beg Taiwanese business
people to return to the island, at various times
appealing to their patriotism (if that is the word for a
self-governing entity with debatable international
status) and their business acumen to limit their
involvement in China. The mainland's highly publicized
energy shortages are often dragged out and dusted off
for display by politicians eager to score points with
Taiwanese blue-collar workers, who often lament the
"sorry state" of Taiwan's labor market.
But the
truth is that Taiwan's unemployment rate is falling as
high-tech firms, particularly in the opto-electronics
and semiconductor industries, are all but combing the
forests for workers, while salaries and benefits are the
best they have been in years and the average annual
salary in Taiwan is nearly six times that in China.
Taiwanese leaders' warnings to come home have
been falling on deaf ears. Taiwanese companies have
invested more than US$100 billion in China. Literally
tens of thousands of Taiwanese enterprises operate on
the mainland, including at least 11,700 in Jiangsu
province alone.
Back home, Taiwan's economy has
become increasingly reliant on a variety of high-tech
industries, particularly in the information-technology
(IT) and consumer-electronics sectors. Semiconductors,
mobile-phone components and flat-screen display panels
are the focus of cutting-edge production and research
facilities throughout the island.
Taiwan is also
host to the world's second-biggest annual computer trade
show, Computex Taipei. During this year's show in June,
more than 21,000 overseas buyers converged on the Taipei
World Trade Center to negotiate procurement deals with
consumer-electronics makers.
However, after
nearly two years of a bruising world economy, Taiwan's
high-tech firms are desperate to cut their overhead and
increase their profits, and many are finding that the
solution lies in transferring their expanding production
to China, despite a host of regulatory obstacles and
often intense domestic opposition.
Taiwan
plants in China fuel Taiwan economy For example,
the Market Intelligence Center (MIC), a local research
house that specializes in tracking the IT and
electronics sectors, has reported that Taiwanese
companies based in China were responsible for 63.3% of
the island's hardware production in 2003 - about $56.7
billion worth of goods. The figure for this year is
expected to increase substantially year-on-year.
Most of the consumer-electronics goods produced
in Taiwan and China for Taiwanese firms are sold under
original equipment manufacturing (OEM) contracts. In
essence, this means that local companies make the
products, and foreign firms slap their name brands on
the finished item. For this reason, big-brand companies
are following their Taiwanese suppliers to China, and
although they are starting to leave the island out of
the procurement loop altogether, they are still relying
on Taiwanese companies for their products.
Japanese consumer-electronics and computer maker
NEC Corp is a good example of this trend. The company
recently slashed its orders from Taiwan-based production
facilities in half as the company's officials explained
that since many of its partners in Taiwan were shifting
production to China, it would make more sense for it to
make its purchases directly through its China branch.
The company noted that it was still doing business with
Taiwanese companies - it was just that they were based
in China.
It is little wonder that NEC made such
a decision. A quick look at the production of nearly any
consumer-electronics product by Taiwanese firms
demonstrates why the focus is on China.
Notebook-computer production, for example, has long been
the preserve of Taiwanese companies such as Quanta
Computer Inc, Arima Computer Co and First International
Computer Inc. And according to the MIC, nearly
three-quarters of the laptops manufactured by Taiwanese
companies are made in China.
Although some
analysts say this has had a deleterious effect on
Taiwan's high-tech job market, the truth is a bit more
complex.
Only weeks ago Quanta, which is the
world's largest notebook-computer maker, announced it
was slashing almost a third of its workforce - about
1,500 employees - and moving the jobs overseas. The
company said the positions would be relocated to a
number of countries, including factories in Europe and
the United States, but most analysts say China will get
the bulk of the jobs. Quanta has major manufacturing
facilities in Shanghai, having invested more than $65.6
million in its operations there.
Commentators
quickly seized on the company's announcement as evidence
that Taiwan's job market was in dire straits. However,
they overlooked the fact that one of Quanta's
subsidiaries, opto-electronics manufacturer Quanta
Display Inc, announced in early July it was planning a
major recruitment drive in the second half of the year.
Taiwan's second-largest computer maker, Compal
Electronics Inc, too, announced that it was relocating
one-tenth of its domestic workforce. Compal has two
factories in China's Jiangsu province, which according
to some reports make as many as 80% of all the company'
products. Compal was quick to add, however, that the
bulk of these jobs will merely be shifted to different
production facilities in Taiwan.
Officials:
Taiwan lacks skilled IT workers Meanwhile,
government officials and analysts say that Taiwan
doesn't have enough skilled workers to meet the needs of
the high-tech industry. One online employment data
researcher, 104 Job Bank, said that sectors such as
flat-panel-display manufacturing may be unable to fill
thousands of positions for skilled workers this year.
A Chinese-language business weekly reported on a
similar trend last month. One of Taiwan's special
business zones, Southern Taiwan Science Park, will
create more than 5,000 high-tech jobs in the second half
of this year, primarily in the opto-electronics and
semiconductor sectors, according to the Win Win Weekly.
Such claims call into question the conventional
wisdom among political commentators and taxi drivers
that Taiwan is hemorrhaging jobs to China. A quick look
at unemployment statistics reveals that Taiwan is hardly
on the verge of a social crisis, as some pundits have
claimed. For the first half of the year, Taiwan's
unemployment rate stood at 4.48%, the lowest figure in
years.
However, the topic of jobs and investment
moving to China is a political gold mine for the
extremes of Taiwan's political spectrum: both diehard
unificationists and pro-independence activists have used
the issue to justify their causes. The unificationists
argue that since China is the world's up-and-coming
economic power, Taipei has no choice but to throw in its
lot with Beijing, saying in effect that if it does not,
Taiwan is sure to miss out on the golden opportunities
that "globalization" has to offer.
The
independence faction uses a similar argument to
different effect. This group says that if Taiwan doesn't
keep its jobs and its money for itself, it will miss a
golden opportunity to become a "regional hub" for
virtually every conceivable sector, from international
finance to IT manufacturing to ecotourism.
However, to many analysts and business people
with a more balanced view, such comments are rather
nonsensical. After all, Taiwan's gross domestic product
(GDP) is expected to grow 5.35% in 2004, according to
the Chung-Hua Institution for Economic Research. Trade,
too, is climbing at a steady rate, and one research
institute, Academia Sinica, expects a 13.94% increase in
exports for the year.
But if increasing
cross-Strait investment is not damaging to Taiwan's
economy, then why do so many commentators insist
otherwise? The key to the issue is the state of
cross-Strait relations, which might accurately be
described as frigid. Few people have the time to listen
to complex explanations about the pros and cons of
streamlining production and expanding supply networks,
especially when Beijing and Taipei are busy bashing each
other with polemics.
Beijing's has launched a
recent offensive against "green businessmen", the term
Chinese editorialists use to describe people who do
business in China but support Taiwan's governing
Democratic Progressive Party and are considered
pro-independence. But Beijing's lashing out and Taipei's
remonstrations to businesses not to "put all of their
eggs in one Chinese basket", have served only to
exacerbate the sense among many business people that
when it comes to the cross-Strait relationship, business
takes a back seat to politics. The lack of progress on
the "three direct links" - trade, transportation and
postal links between the two sides of the Taiwan Strait
- is typical of the problems Taiwanese businesses face
when making progress in China.
Taiwanese
businesses count on Chinese labor and cheap land to
compete internationally, and China needs Taiwan's
capital and know-how to provide jobs in its effort to
lift millions of people out of poverty.
Whatever
the respective governments say, business people on both
sides of the Strait know that there is more to be gained
through cooperation than through conflict.
And,
thus far, the financial performance of Taiwanese
companies that are diversifying into China are proving
them right.
Mac William Bishop is a
journalist based in Taipei. Comments or queries may be
sent tomwbtaiwan@hotmail.com.
(Copyright 2004 Asia Times Online Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
