Quanta Computer Inc (廣達電腦) said it plans to more than double its production in Shanghai this year, helping China to unseat Taiwan as the world's largest manufacturing base for notebook computers.
Quanta, the world's largest notebook-computer maker, is on course to produce about 10 million notebooks this year, of which 75 percent will be made in China, executive vice president Michael Wang (
The company, whose biggest customers include Hewlett-Packard Co and Dell Inc, is moving production to cut costs as its US customers demand lower prices.
Quanta is increasing manufacturing in China after completing a plant in Shanghai's Songjiang Industry Park, where labor, electricity, tax and government fees account for only 5 percent of the total costs, Wang said.
"Taiwan's computer makers' profit margins are still under pressure as cheap manufacturing bases in China have caused overcapacity in the industry," said Phil Chen, who manages Grand Cathay Securities Investment Trust Co's (大華投信) US$46 million High-Tech Fund.
Chen said he planned to sell shares in Quanta yesterday.
Lower prices are paring profit margins at Quanta and rivals such as Compal Electronics (仁寶電腦), the world's No. 2 notebook maker.
Quanta's gross profit margin fell to 5.7 percent in the second quarter from 7.8 percent a year ago. Second-quarter profit rose 60 percent to NT$3.2 billion on a 95 percent rise in sales to NT$65.3 billion, the company said.
Dell, the world's second-biggest PC vendor, last week slashed prices on some products by as much as 22 percent, a day after No. 1 Hewlett-Packard said the company's PC division lost money in the second quarter by cutting prices too deeply.
Quanta was the last of Taiwan's notebook makers to move production to China, building its first plant in March 2001.
"We have created the world's biggest notebook computer production site in China," Wang said. "We have reproduced our Taiwan business model in Shanghai."
Quanta started this year shipping notebooks from its Songjiang factory directly to end-users in the US and Europe, cutting inventory costs for clients such as Dell and Hewlett-Packard.
The company plans to open its first US service center in Nashville, Tennessee, this year, Wang said.
Quanta joins Taiwanese electronics manufacturers including Micro-Star International Co (微星), Asustek Computer Inc (華碩電腦) and Hon Hai Precision Industry Co (鴻海精密) that have been moving more of their production to China.
Taiwan's factory closures almost doubled in the first seven months of this year to 3,361 from 1,865 in the same period a year earlier, according to the Ministry of Economic Affairs.
The closures helped to drive the nation's jobless rate to 5 percent at the end of last month, close to the record of 5.4 percent in January last year.
Taiwanese companies' investments in China rose almost a third in the first seven months, the Investment Commission said.
Quanta's migration to China has caused some logistical difficulties because suppliers in the country are spread out and transport links are inefficient, Wang said.
The company is encouraging suppliers to open plants in the Songjiang park to lower shipping costs and avoid delays.
"Our supplies can get stuck at customs between different administrative regions in China because some Chinese customs [offices] aren't yet computerized," Wang said.
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