Taiwan Semiconductor Manufacturing Co and Foxconn are not the only Taiwanese tech companies feeling compelled to expand abroad. Suppliers of chip and electronics tools, materials and plant builders are also venturing internationally as top clients expand.
Ming-Kuen Lai, general manager of facility builder Acter, said his company’s south-east Asian business surged 50 per cent last year, outperforming its core markets of Taiwan and China. “This growth is expected to continue in 2024,” Lai said.
Acter builds electronics plants and clean rooms for tech companies such as Foxconn, Delta Electronics, Wistron and ASE Technology.
While south-east Asia contributes just over 10 per cent of Acter’s revenue, Lai highlighted particularly strong growth in Thailand, Vietnam and Malaysia. “Vietnam is experiencing a boom in electronics assembly, while Thailand is seeing an increase in new printed circuit board plants and Malaysia is attracting semiconductor packaging businesses,” he said.
But Lai also acknowledged the complexities of doing business in the region. “[It’s] actually a collection of diverse nations, with all different cultures and languages. Compared to China and Taiwan, operating in south-east Asia requires more effort and patience to generate good results.”
This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.
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Taiwan’s investment in Thailand, Vietnam and Malaysia rose 146 per cent in 2023 over the previous year to more than $2.2bn, according to government data.
Geopolitical tensions, combined with a growing focus on supply chain resilience, have triggered a significant shift in the tech industry. After decades of concentrating production in China and Taiwan, electronic assemblers such as Foxconn, Quanta and Wistron, along with major chip suppliers from TSMC to United Microelectronics Corporation, are setting up operations in south-east Asia, Japan and even Europe.
China’s lukewarm economy is another motivation for upstream suppliers to venture into new markets. Its slowdown has intensified competition and price wars, according to executives. Expanding outside the country offers the potential for new growth. Frank Liang, general manager of C Sun, said his company was seeking to expand to Thailand and Malaysia, while also considering Japan.
C Sun counts some of the world’s top chip packaging and printed circuit board makers as clients, including ASE Technology, Unimicron, and Nan Ya PCB. The company has also supplied machines to TSMC to meet its growing need for advanced chip packaging. C Sun’s focus has historically been on Taiwan and China, where most of its customers are located.
Liang said China’s economy had not fully recovered. “So that’s also a reason we equipment and tool vendors need to seek new growth drivers,” he said, adding that there were also new opportunities in chip packaging, an area of the supply chain that was traditionally an afterthought.
TSMC, Intel and Samsung, for example, are all investing heavily in advanced packaging, an important technology for connecting different types of chips and enabling more powerful artificial intelligence computing.
“The new demand for equipment for high-end advanced packaging provides better profit than traditional business,” Liang said, adding that it had taken a long time to reach this point. “We have invested in this area for more than 10 years, and it finally generates good results amid this massive supply chain and tech shift.”
Topco Scientific, a supplier to chip material makers such as Japan’s Shin-Etsu Chemical and Fujimi, is also eyeing new business in south-east Asia and Europe. Topco has a joint venture with Shin-Etsu Quartz Products to produce quartz used in chipmaking and electronic devices. As a supplier to all the major Taiwanese chipmakers, including TSMC and UMC, Topco identified an increasing need to expand in a number of markets.
Chair Jeffery Pan said Topco was using Singapore as a base to expand and serve Malaysia, Thailand and Vietnam, where there was increased demand for waste treatment, chemicals and materials. The company also set up an office in Japan last summer and planned to expand to Europe as soon as this year, Pan said.
Topco was one of the earliest Asian suppliers to set up an office in the US state of Arizona, where TSMC and Intel are both building advanced factories, but the company has put construction of a planned logistics centre on hold for now.
“After a year of downturn and adjustment for the overall semiconductor industry . . . we find operations returning to growth from this year, and we expect demand to further pick up from mid-2024,” Pan said.
He added that his company had selected Prague as its first European base to tap growing demand for onshore semiconductor production. Prague is about a two-hour drive from Dresden, Europe’s most important chipmaking hub.
The trend of Taiwanese companies moving beyond their home market is likely to continue. “We follow our customers like nomads follow water,” said Lai of Acter, adding that while China was still an important market, being competitive there meant being able to survive fierce price competition.
Outside China, meanwhile, years of effort are starting to pay off. “We have been in Vietnam since 2008, but it just started generating profits in recent years, thanks to the supply chain shift,” Lai added. “Normally, it really takes more than five years to understand a market and cultivate a capable local team. Diversifying the footprints needs longtime commitment.”
A version of this article was first published by Nikkei Asia on April 4 2024. ©2024 Nikkei Inc. All rights reserved.
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Source: Economy - ft.com
