Contract electronics manufacturer Pegatron Corp (和碩) yesterday said that it has begun exploring overseas expansion options to cope with escalating US-China trade tensions.
The company is to reallocate production from China to its existing sites in the Czech Republic and Mexico as it reviews its global footprints, Pegatron chief executive officer S.J. Liao (廖賜政) told an investors’ teleconference, adding that it is also considering setting up new manufacturing bases in Southeast Asia.
Although reallocating production capacity and moving equipment between the company’s locations would not require substantial capital expenditure, the change would push up management costs, Liao said.
Setting up brand new production lines in Southeast Asia would be costlier and it would take two to three years before such facilities would come online, he added.
“We will be talking with our customers about sharing the burden of additional costs,” Liao said.
US President Donald Trump’s looming tariffs on US$260 billion of Chinese-made goods are not the only reason for the company to diversify its production, Liao said, adding that the entire supply chain is challenged by labor shortages and rising wages in China.
Diversification would also help push down the cost and difficulty of gathering the required workforce during peak seasons, Liao said.
To avoid US tariffs, products made outside China must meet country-of-origin requirements, which stipulate that 30 to 35 percent of the value of an exported product must be derived locally, Pegatron chief financial officer Charles Lin (林秋炭) said.
That could be more difficult for electronics assemblers, which rely on key components from China’s well-established supply chains and industry hubs, Lin said, adding that it would take until next year for the effects of trade tensions on demand to materialize.
Lin rejected reports suggesting that Apple Inc has cut iPhone XR orders from Pegatron and other suppliers due to lower-than-expected demand, saying that the company’s strong performance last month showed that the ongoing peak season has met expectations.
Pegatron’s plants have been running at full capacity, he said.
The company reported that revenue last month rose 55.1 percent monthly and 11.7 percent annually to NT$186.02 billion (US$6.06 billion), a new monthly high.
Pegatron previously reported that net income in the third quarter rose 5.1 percent quarter-on-quarter, but dropped 31.9 percent from the same period last year due to rising component and labor costs, as well as a delayed production ramp-up.
Net income was also dragged down by NT$140 million in foreign-exchange losses, down from gains of NT$1.01 billion in the previous quarter. Earnings per share were NT$1.08.
Revenue last quarter rose 18.7 percent sequentially, but dipped 4.4 percent from the same period last year to NT$322 billion.
Gross margin inched up from 3.2 percent at the end of June to 3.3 percent at the end of September, while operating margin rose to 1.1 percent from 0.6 percent in the second quarter.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said that its investment plan in Arizona is going according to schedule, following a local media report claiming that the company is planning to break ground on its third wafer fab in the US in June. In a statement, TSMC said it does not comment on market speculation, but that its investments in Arizona are proceeding well. TSMC is investing more than US$65 billion in Arizona to build three advanced wafer fabs. The first one has started production using the 4-nanometer (nm) process, while the second one would start mass production using the
A TAIWAN DEAL: TSMC is in early talks to fully operate Intel’s US semiconductor factories in a deal first raised by Trump officials, but Intel’s interest is uncertain Broadcom Inc has had informal talks with its advisers about making a bid for Intel Corp’s chip-design and marketing business, the Wall Street Journal reported, citing people familiar with the matter. Nothing has been submitted to Intel and Broadcom could decide not to pursue a deal, according to the Journal. Bloomberg News earlier reported that Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is in early talks for a controlling stake in Intel’s factories at the request of officials at US President Donald Trump’s administration, as the president looks to boost US manufacturing and maintain the country’s leadership in critical technologies. Trump officials raised the
‘SILVER LINING’: Although the news caused TSMC to fall on the local market, an analyst said that as tariffs are not set to go into effect until April, there is still time for negotiations US President Donald Trump on Tuesday said that he would likely impose tariffs on semiconductor, automobile and pharmaceutical imports of about 25 percent, with an announcement coming as soon as April 2 in a move that would represent a dramatic widening of the US leader’s trade war. “I probably will tell you that on April 2, but it’ll be in the neighborhood of 25 percent,” Trump told reporters at his Mar-a-Lago club when asked about his plan for auto tariffs. Asked about similar levies on pharmaceutical drugs and semiconductors, the president said that “it’ll be 25 percent and higher, and it’ll
CHIP BOOM: Revenue for the semiconductor industry is set to reach US$1 trillion by 2032, opening up opportunities for the chip pacakging and testing company, it said ASE Technology Holding Co (日月光投控), the world’s largest provider of outsourced semiconductor assembly and test (OSAT) services, yesterday launched a new advanced manufacturing facility in Penang, Malaysia, aiming to meet growing demand for emerging technologies such as generative artificial intelligence (AI) applications. The US$300 million facility is a critical step in expanding ASE’s global footprint, offering an alternative for customers from the US, Europe, Japan, South Korea and China to assemble and test chips outside of Taiwan amid efforts to diversify supply chains. The plant, the company’s fifth in Malaysia, is part of a strategic expansion plan that would more than triple
RSS