By Manik Mehta
KUALA LUMPUR, May 17 (Bernama) -- Amid the ongoing US-China trade tensions, many Taiwanese companies are opting to leave China by either returning to Taiwan or scouting for suitable sites in Southeast Asia, including Malaysia.
According to the Taiwan External Trade Development Council (TAITRA), Taiwan’s trade promotion agency, there are some 80,000 Taiwanese companies, many of which are small, operating on mainland China.
A large number of them manufacture or deal with machinery products, electronics and automation, supplying to a host of industries such as automotive and aerospace.
Coincidentally, the automotive and aerospace industries are also high on Malaysia’s list of priority industries.
Thus there is what Taiwanese corporate executives describe as a “good fit” with Malaysian companies, which are trying to assert their global position in these industries.
In an interview with Bernama in Taipei, TAITRA president and chief executive officer Walter Yeh pointed out that Taiwan’s two leading industries are information technology (IT) and machine-building industries.
“As the world’s fourth largest exporter of machine tools and components, Taiwan has averaged US$4 billion in exports of these products for each of the last few years from a network of more than 1,000 precision machinery manufacturers and 10,000 plus downstream suppliers,” he said.
Since the ongoing US-China trade war has unnerved many buyers and sellers, given the globalised character of supply chains, Taiwanese companies are looking for alternative sites for their new start-up operations.
This is in line with the Taiwanese government's New Southbound Policy, which essentially focuses on cooperation with the ASEAN member states and also India. The policy is designed to reduce the dependence on China and tap the huge economic and trade potential inherent in the ASEAN region, particularly Malaysia, Indonesia, Singapore, Thailand and Vietnam.
The ASEAN Economic Community (AEC), launched in December 2015, has attracted considerable attention in Taiwan’s industry, which is willing to offer its “unique smart technology based on a high level of artificial intelligence that is the mainstay of the Taiwanese industry’s future-oriented development”, as one Taiwan industrialist put it.
Yeh said that with the rapid restructuring of the global supply chain, South Asia and the ASEAN have undergone incredible growth in recent years.
“The economy in Taiwan is closely tied to the two regions. The ASEAN community is today the second largest export and investment destination for Taiwan. Malaysia is, of course, an interesting market for us and Taiwanese companies would be looking for opportunities in that country,” he observed.
He said Taiwan has developed close ties with the ASEAN region in areas such as technology, trade and business and other fields.
The strategy adopted by many Taiwanese companies is to “operate from inside the ASEAN region”, which suggests that the combined market of over 500 million consumers could be penetrated by setting up manufacturing operations in one of the ASEAN member states.
Yeh pointed out that the island’s Southbound policy was aimed at intensifying trade and business with the ASEAN member states.
“Already, Taiwan’s economy is intensely involved in the ASEAN region, following the rapid restructuring of the global supply chain and the impressive growth recorded by the ASEAN member states. Today, ASEAN is the second-largest export and investment destination for Taiwan. We have close ties, including business-to-business contacts, with the ASEAN region in the fields of technology, tourism, education, labour and culture,” he explained.
Underscoring TAITRA’s interest in the ASEAN region, Yeh spoke of the three main thrusts undertaken by the agency.
“TAITRA’s efforts are three-pronged for forging closer ties with the AEC – enhancing human resource networks, providing marketing channels, which includes organising exhibitions, forming buyers’ networks, launching marketing alliances, etc and opening product promotion centres. These efforts are directed towards developing deep, long-term and diverse channels for Taiwanese companies to form partnership ties with the ASEAN economies,” Yeh said.
Commenting on the growing trade protectionism and impact of the US-China trade tensions on Taiwan's business, he said that in the short term, Taiwan's companies may have to relocate their production operations, “but they could also benefit from new orders for electronics and machinery, for example, as a result of the shifting market.”
“In the mid to long run, it would still be necessary for them to expand to other potential markets outside the US and China. Given their flexibility and resilience, Taiwanese companies are better equipped to work with interested partners, including from the ASEAN region, to develop markets outside the USA and China,” he said.
He said that while Taiwan does not have a large domestic market for its “sophisticated smart machinery”, there is a huge international market created by the overseas manufacturing operations of Taiwan companies.
TAITRA is working towards solidifying Taiwan’s position as a global smart manufacturing hub.
Taiwan’s two product categories – the IT and machinery sectors – are the strengths of the island’s manifold industries. Yeh pointed out that Taiwan’s machine-tool products, for example, are unique and have highly-advanced innovative features designed to handle complex manufacturing functions with the deployment of robots and automation.
“Taiwan exported in 2018 some US$4.565 billion worth of machine tools and components, an 8.28 per cent increase over the previous year. As the world’s fourth largest exporter of machine tools and components, Taiwan has averaged US$4 billion in exports for each of the last few years drawing on a network of over 1,000 precision machinery manufacturers and 10,000 plus downstream suppliers,” he said.
Taiwan exports some 80 per cent of its total machine-tool production to 138 countries, helping solar energy plants, major semiconductor manufacturers, panel industries, multinational car makers and others in their innovation efforts and enhancing their competitiveness through an array of advanced machine-tool products.
Some Taiwanese companies operating in the Greater Taichung region, the home to 1,500 precision machinery manufacturers, are also building up contacts with companies in Malaysia’s Kulim Industrial Park. Taiwan has a large cluster of machinery and electronic manufacturers in its own Hsinchu Science Park which contributes over one trillion Taiwan dollars to Taiwan’s economy.
“We can learn a lot from each other,” remarked a trade official, who prefers to remain anonymous.
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