Bloomberg Businessweek Europe - 07.10.2019

45

Taiwan Tech Rethinks China

These men created a

manufacturing boom.

Now they’re poised to pivot

Thirty years ago, Taiwanese tech entrepreneurs started moving factories to the

mainland, kicking off a global economic transformation that’s made China the

world’s top manufacturer of electronics. Today, four Taiwan-basedcompanies—

Foxconn Technology Group, Inventec, Quanta Computer, and Compal—together

account for some 40% of exports from China to the U.S. of computers, phones,

and related items. But faced with growing trade tensions and U.S. tariffs, the lead-

ers of those companies are reconsidering their commitment to China. Although

any pivot away from the country is just starting, factories that leave won’t come

back anytime soon. Here are four men responsible for the shift decades ago

who will play a key role in deciding how much longer China will remain the global

manufacturing king.—Debby Wu

 SOLUTIONS Bloomberg Businessweek October 7, 2019

Diverted from China

Diverted from the U.S.

Vietnam

7.5%

0.4%

Taiwan

1.9%

0.2%

Contribution to GDP from output diverted

by the U.S.-China trade war as of Q1 2019

Terry Gou, 68,

founder

and board

member,

Foxconn

Technology

Group

Yeh Kuo-I, 78,

founder

and board

member,

Inventec

Corp.

Barry Lam, 70,

founder and

chairman,

Quanta

Computer Inc.

Ray Chen, 70,

vice chairman,

Compal

Electronics

Inc.

○ KEY PRODUCTS:

Apple iPhone, Amazon

Kindle, Google Pixel

○ SIGNS OF CHANGE:

Expanded Indian

manufacturing of

older-model iPhones;

building a plant in

Wisconsin

Gou started out making knobs for black-and-white TVs, then connectors for

game-console maker Atari, then just about every gadget imaginable. Today,

Foxconn is the world’s biggest electronics contract manufacturer, with facilities

in more than 30 Chinese cities and in 14 other countries. Gou relinquished his

chairmanship this year for a failed bid for Taiwan’s presidency, but company

insiders say he remains the ultimate decision-maker at Foxconn. While the

company has faced criticism for its treatment of factory workers, Gou has

raised wages and improved working conditions. A promised facility in Wisconsin

praised by U.S. President Trump hasn’t yet opened, but the company says it will

build server components and device screens there.

Chen has a mixed record in China: In 2018, Lenovo Group paid Compal

$257 million to unwind a joint venture the two founded in 2011. But a year earlier,

Compal lost more than $130 million when Chinese phone brand LeEco failed

to pay for handsets. Today, Compal is looking back home, with a new factory

in Taoyuan and expansion of a plant nearby. After Trump introduced his tariffs,

Compal began making networking gear in Vietnam, and the company says it may

add other products to its facilities there.

○ KEY PRODUCTS:

HP and Dell laptops

○ SIGNS OF CHANGE:

Adding notebook-

manufacturing

capacity in Taiwan and

considering further

investments in Vietnam

Lam was born in Shanghai, but his family fled to Hong Kong during the Chinese

civil war, and he studied in Taiwan. Although he was diagnosed with lung cancer

more than a decade ago, he’s still the public face of Quanta. Lam describes

the company as a turtle—patient and persistent—but it can strike fast when

necessary. He’s bought a factory adjacent to a Quanta facility in the northern

Taiwanese city of Taoyuan, where he’ll make what he calls “premium products”—

likely servers and high-end laptops. He’s also scouting locations in Southeast

Asia and expanding a 7-year-old data center business in the U.S.

○ KEY PRODUCTS:

Apple MacBook, Apple

Watch, Amazon and

Google servers

○ SIGNS OF CHANGE:

Expanding capacity in

Taiwan and looking at

locations elsewhere

in Asia

Yeh is a key backer of Taiwanese tech companies and has invested in businesses

from real estate to orchids. As the trade war intensified, an Inventec executive

said Yeh had offered to convert an orchid-growing facility in Vietnam into an

Inventec factory to skirt U.S. tariffs. While the comment was in jest, Inventec has

shifted some production of small appliances to Malaysia and has said it will move

manufacturing of U.S.-bound laptops to Taiwan.

○ KEY PRODUCTS:

HP laptops, Apple

AirPods, Google servers

○SIGNS OF CHANGE:

Plans to move

production of laptops

for the U.S. market to

aiwan by December

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