Press Room
MIC: Why US Needs Taiwan for its Manufacturing Comeback
November 18, 2016

 

The fast-changing economic and technological trends in today's world have forced the global manufacturing industry to grow in ways never imagined. Forget economies of scale and cost reduction and think advanced or smart manufacturing technologies. Advanced manufacturing—built from the integration of automation, software applications, sensing components, network technologies, and emerging materials across sectors—is bringing massive technology and productivity improvements to the industry, spurring new innovations and stretching possibilities. Re-industrialization is now a governmental priority among major countries around the world.

For decades, Taiwan's IT industry has worked closely with US companies. This goes back to the days where high production costs had forced US companies to move their labor-intensive production overseas, leaving only high added-value activities like technology R&D and brand building in-house. And this is where Taiwan companies come in. With the most comprehensive IT supply chain and world-class production and management capabilities, they have honed themselves to be the best and trusted partners of choice for many international brands, including US giants Apple, Dell, HP, and Amazon. "Taiwan companies have helped international brands optimize production efficiency with relatively low cost. Meanwhile, they have focused on developing innovative business models that have a high level of added value and success," says Victor Tsan, Vice President & General Director of MIC (Market Intelligence & Consulting Institute), a Taipei-based ICT research institute.

In an aim to revitalize the industry, the US government has pledged to bring manufacturing back to America. But it seems unlikely to happen in the short run since the global IT supply chain and manufacturing activities are concentrated mostly in Asia. US companies need to resolve issues like fractured local supply chain and lack of technical talent. Therefore, the decision to bring manufacturing back to America will unlikely shift the US-Taiwan cooperative relationship into a competitive one. Instead, a stronger US-Taiwan bond can be expected in future ahead.

Under the "bringing manufacturing back to America" strategy, Apple had transferred its i-MAC desktop PC production back to the United States a while back. But instead of building its own plant, Apple shifted the entire production to Quanta's desktop PC plant in California. Instead of doing pure-manufacturing business, Quanta has integrated with local supply chain in US to help it transform. This has not only deepened the connection between US and Taiwan in terms of innovation activities but also promoted the bilateral partnership further.

Quanta is just one of the few successful cases. Other cases include Wistron which set up a USD 21 million GreenTech plant in northern Dallas suburb of McKinney for more efficient electronics recycling; Delta which established a new advanced manufacturing research center in the United States to take part in the development of the next-generation products and technologies; MediaTek which set up dedicated R&D offices in Silicon Valley, San Diego, and Massachusetts to recruit R&D talent and pour investment into R&D in the hope of integrating with the US supply chain.

Amid US's promise to bring manufacturing back to America, Taiwan companies will continue to play a substantial role in providing US companies the resources (capital, talent, land and labor) they need. Faced with emerging challenges from China, EU, and ASEAN, as well as Japan's comeback, Taiwan stands to be the partner of choice to the United States.

Taiwan is capable of providing turnkey solutions to help revitalize America's manufacturing industry. To create more job opportunities, US can encourage Taiwan SIs (System Integrators) to build plants in the United States to produce modularized products, taking advantage of Taiwan's strength in production, manufacturing, packaging, and testing technologies while providing resources they need during the production. Taiwanese manufacturers can help US companies fill the gap in the supply chain by integrating with the US supply chain. The strengthened relationship between the US and Taiwan will create win-win outcomes for both the United States and Taiwan in future ahead.

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About MIC

Market Intelligence & Consulting Institute (MIC), based in Taipei, Taiwan, was founded in 1987. MIC is Taiwan's premier IT industry research and consulting firm providing intelligence, in-depth analysis, and strategic consulting services on global IT product and technology trends, focusing on markets and industries in Asia-Pacific. MIC is part of the Institute for Information Industry. http://mic.iii.org.tw/english