Taiwan IT sector loyal to mainland
Liu Baijia
2004-10-21 05:50

SUZHOU: A labour shortage in some areas of the Chinese mainland will not lead to a shift of the investment of Taiwan information technology companies to other countries, although some Taiwanese-invested companies in the textile and toy businesses are reported to be thinking about moving away, said industrial officials and executives.

"I don't think this will happen in the IT business," said Enoch Du, secretary-general of the Taiwan Computer Association (TCA), on the sidelines of the ongoing 2004 China Suzhou Electronic and Information Exhibition (eMEX), which opened yesterday in Suzhou of East China's Jiangsu Province.

A labour shortage started in late 2003 in East China's Fujian Province and spread this year to neighbouring Guangdong and Zhejiang provinces, three major manufacturing bases in China.

The major reasons were that workers complained of low pay and poor working conditions.

It was also reported that some textile and toy businesses invested by Taiwanese companies began to think about moving to some countries with cheaper labour.

Du said the situation may not be that serious and it will not have any significant impact on IT companies invested by Taiwan-based firms.

He believed that although the shortage is a fact in some provinces of China, which is believed to be able to provide unlimited cheap labour, it is temporary and labour from inland regions will fill the gap.

Alexander Lee, president of Asus Computer Group (Suzhou) invested by the Taiwanese IT giant Asus, also believed that with more migrant workers coming from rural inland provinces to the more developed eastern regions, the problem will be solved and the current shortage in some southern provinces will not change the situation for his company.

Du added that the IT business is quite different from the textile and toy businesses, because the latter are more cost-sensitive, labour is a major part of their costs and investment is usually smaller than in IT companies.

"IT companies need millions of dollars in investment and they cannot just move it away," he said.

On the other hand, labour costs are only a small part of their investment, so it is not wise to shift their factories to other countries, just because of a labour shortage.

He said a shared culture and language between the Chinese mainland and Taiwan Province was very attractive to IT companies from the island, because many of them have had difficulties when investing in foreign countries.

However, Zhang Li, deputy secretary-general of TCA, urged Taiwan-invested companies not only to think of labour costs as a key factor in their business operations on the Chinese mainland.

"If you want to just compete with low labour costs, you can not win in the competition against local companies," said Zhang.

He said Taiwan-invested companies should move up in the value chain with their experience in developing international markets and technology, or they will lose in the fight with local counterparts.

Zhang believed that attracting talented people rather than just focusing on controlling labour costs is a more urgent task for Taiwanese IT companies on the Chinese mainland.

(China Daily 10/21/2004 page10)