Vietnam among Taiwan (China)-based firms’ first choices for relocation to SEA

Vietnam, along with Thailand, is considered the first choice for suppliers based in Taiwan (China) planning to move into Southeast Asia (SEA) to address increasing capacity demand, Digitimes Asia has reported.

In a story published on May 26, the news platform said many Taiwan-based suppliers intend to meet increasing capacity demand by relocating manufacturing to Southeast Asia and building new industrial clusters there to tap the demographic and geographic advantages as well as rapidly growing market demand in the region. “They look to replicate their experiences in China and make Southeast Asia the next world factory that will support rising needs as the global supply chain makes transitions to accommodate "G2" (US vs China) developments.” Some suppliers note that manufacturers choose to build new production bases in Vietnam and Thailand in part for their transport infrastructure, it explained. Being able to transport goods via their road networks will make up for the incomplete supply chain ecosystems in Vietnam or Thailand. It also added that the shift to regional manufacturing has given rise to the new trend – short supply chains. The supply chains in Vietnam and Thailand are near completion after years of effort.

Furthermore, component suppliers' added demand in recent years are largely for automotive and home appliance parts, rather than ICT devices and applications, which allows them to better connect with Thailand's local industry development. Vietnam and Thailand are therefore the ideal choices for Taiwan-based suppliers foraying into Southeast Asia, followed by Malaysia, Indonesia, and the Philippines, the article said. Many suppliers indicate that the COVID-19 pandemic has forced them to put off or suspend their plans to move into Southeast Asia. Digitimes Asia cited industry observers as saying that when the suppliers strategize about building new production bases in Southeast Asia, aside from customer requirements and supply chain considerations, they should also gain an understanding of what preferential treatments and investment incentives Southeast Asian governments may be putting forward to attract manufacturers looking to set up production outside of China.