Home Page eNewsletter 2019 To China-U.S. Trade War Stalemate, Have You Taken Reasonable Steps in Response?
2019
To China-U.S. Trade War Stalemate, Have You Taken Reasonable Steps in Response?
2019/08/14
哈膜觀點電子報第01期 108.07.08出刊
哈鏌機械手臂


 Hi-More Newsletter 第01期 108.07.08出刊


 

 To China-U.S. Trade War Stalemate, 

Have You Taken Reasonable Steps in Response?


 

In What Way Would This Newsletter Help You?

 

With the escalating trade war between China and the U.S. having been continuously headlined by global media agencies since the second half of 2018 and left businesspersons all around the world anxious and disturbed, the inaugural issue of Hi-More Newsletter is set to help readers to take more reasonable steps with more practical points of view in these uncertain times.



Second Round of Tariff War

 

Few would question that the war trade between the U.S. and China has entered an intensifying stage for now. As part of its countermeasure to China’s unfair trade practices, the U.S. decided to levy duties of 10% on US$200 billion of goods from China starting September, 2018, and then has further raised the tariffs to 25% since May 10. To counter, China announced a move to impose duties ranging 10-25% on imports from the U.S. beginning on June 1. 

 

The list of imports subject to U.S.’s punitive duties includes such industrial products as machinery, motorcycle and bicycle parts, telecom equipment, PCs, as well as consumer goods as seafood, leather goods, apparel, footwear and plastic products. In the meantime, China imposes its additional tariffs on U.S.’s chemical products, vegetables, whiskey, soybeans and so forth. 



The good news to global enterprises involved in the trade turbulence is that U.S. President Trump Donald has considered a temporary cease-fire and promised to hold off on his plan of new 25% duties on imports worth US$300 billion from China after a meeting with China’s Xi Jinping during the 2019 G20 summit. However, the tariff war in every way has cast shadow to economic outlooks in many countries around the world, including Taiwan.



Whammy or Windfalls?

 

Considering the escalation of the trade war between the U.S. and China, some market observers opine that Taiwan, whose export-driven economy depends heavily on trade with the two said countries, has been caught in crossfire for sure. For example, Bloomberg’s reports indicate that 1.6% of Taiwan’s GDP, which is bundled with exports to China, will likely be dampened, while Deutsche Bank points out Hong Kong and Taiwan as the main victims and projects their GDP for this year to decline 3.9 and 3 percentage points, respectively, as a consequence of the China-U.S. tariff war


On the flipside, nevertheless, the abovementioned economic woes have brought Taiwan windfalls in the form of growing homebound investments by Taiwanese manufacturing companies operating in China. For example, a couple of bicycle makers have shifted part of their production of high-end products back to Taiwan. Meanwhile, Taiwanese electronics makers have also mused about ramping up production at home in response to the 25% tariff imposed by U.S. on imports from China.   


From a realistic point of view, the idea of a homecoming is a reasonable and rational strategy worth trying by Taiwanese enterprises with operation in China, especially those whose products can be kept competitive in the global market when produced at home. However, it seems unfeasible to traditional manufacturing companies taking advantage of lower labor costs in China, as most of them have been upset by underselling rivalry and wafer-thin margins, not to mention the additional tariffs newly imposed on their products to be destined in the U.S.

So, it is an interesting question: what could such companies (like machinery and plastic product makers) do to escape from the crossfire in the China-U.S. tariff war?


 

To the abovementioned question,
the answer may have been right in front of them:


Southeast Asia.

 


Southeast Asia: Sanctuary from Trade War

 

In the face of the increasing uncertainty during the ongoing trade dispute between China and the U.S., a number of foreign and local manufacturers have chosen to invest more in Southeast Asian countries to hedge the operational risk of operating in China, according to Reuters. Some have even managed to seek more reliable supply of raw materials in those countries to replace existing sources from China.

Before last year’s outbreak of the China-U.S. tariff war, CEOWORLD magazine published results of its survey on world’s top 10 destinations to invest for 2018, which was based on feedback in several aspects, such as economic stability and trade opportunities, from hundreds of CEOs and decision-makers in different businesses from all over the world. The results show that Malaysia, the Philippines and Indonesia were recognized by survey respondents as top-five countries to invest. In 2019, when the trade war has intensified, World Bank also issued a report of this kind and put Vietnam, Singapore and Indonesia on its best 20 investment destination list. All the results justify the growing optimism among global business owners toward Southeast Asian countries to help provide them continued growth momentum in the years to come.



來源:2018全球投資國家排名,CEOWORLD


   HI-MORE Insight: Step by Step without a Rush

 

Benefiting from the trade war between China and the U.S., the Southeast Asian countries are expected to witness brightening economic prospects in the short term, to provide shelter to Taiwanese traditional manufacturers with hopes of sparing themselves the trade turmoil. However, their attempt at immigrating to the emerging regional markets for long-term survival will likely disappoint them in the end, in case they simply rush to relocate production there without considering market assessment and resource limitations. 


Vic Chen, president of Hi-More, a high-profile robotic arm manufacturer, is one of Taiwanese corporate managers and directors who have actively explored Southeast Asia over the past few years, and provides his insights into proper business deployments in the regional market.


Looking with favor at Vietnam and Indonesia, Chen opines market potential there is actually enormous. He emphasizes Vietnam is particularly the best investment option to Taiwanese traditional manufacturers who would like to move production out of China, partly because of Vietnam’s geographical proximity to China, and partly because of the comparatively well-developed light industries, such as textile and footwear, in the southeast Asian country. In addition, the president stresses, the continued promotion of Mandarin language learning there leads to a relatively friendly business environment to Taiwanese entrepreneurs.  


 


In light of the intensifying China-U.S. tariff war resulting in migration of traditional manufacturers already with operation in China, 

"Vietnam is the optimal destination among other Southeast Asian countries for them,"

stated HI-MORE president Vic Chen

 

As to Indonesia, Chen points out that the nation boasts the highest GDP among the 10 ASEAN founding members, to say nothing of its largest population and biggest number of Muslims. All these distinctive characteristics combine to make it a potentially lucrative market for consumer products, including food packaging materials, motorcycles and automobiles, stresses the president, who adds that Indonesia is very likely to emerge as one of world’s major manufacturing bases in the near future.


Since things about investing in the countries are looking this rosy, shall Taiwanese traditional manufacturers move all their production there as soon as possible, so as to get ahead of the game amid tariff disputes between China and the U.S.? Chen doesn’t think so according to his observation, mentioning that some of Hi-More’s customers (mainly engaged in plastic injection molding) tend to divert their export orders, mostly for low-end products, to their contract suppliers in Vietnam in stead of building production lines outside China to fend off U.S.’s additional tariffs, while keeping their exiting equipment humming to fill domestic orders for the moment. 
 
 
In other words, Chen feels that Taiwanese makers should explore the markets more rationally and step by step without a rush, mainly because moving production there requires lots of resources for land purchase and facility construction, while taking much time to build supply chain. Therefore, he says, now would not be a good time point to pour too much resource into efforts to tap the Southeast Asian markets, especially when China-U.S. trade war uncertainty still lingers.

In this logic, Chen and Hi-More’s sales staff take different strategies to develop the Vietnamese and Indonesian market. In Vietnam, Chen notes, now that Hi-More has delivered over 800 units of robotic arms over the years to local customers, the company hence is eager to improve the quality of its service to satisfy the exiting users. “We have just opened a service center in northern and southern Vietnam, respectively, to provide timely service including periodical maintenance and hardware upgrade on demand,” he adds.


More notable is that, Chen emphasizes, Hi-More also looks to serve as a professional promoter of industrial automation solutions rather than a maker of robotic arms in the Vietnamese market. To this end, the company has moved to work on product modularization and build a knowledge database of various robotic arm applications, both of which are designed to make sure its customized, innovative products, including those that have been worked out, can be supplied to help injection molded product makers automate their back-end production processes and at more competitive prices. Chen states that the strategy will allow Hi-More to further boost its production efficiency while maintaining excellent flexibility as it did in the past, not to mention to assure customers of higher added value.


Besides, Hi-More will also expand its participation in the 19th Vietnam International Plastics & Rubber Industry Exhibition, scheduled Oct. 3 through 6 in Ho Chi Minh, to seek more cooperation opportunities with local partners, Chen mentions.


As to Indonesia, Chen says Hi-More will continue to increase its market shares there as its short-to-mid-term objective, which is set in a different way compared to that for Vietnam simply because of the shortage of skilled workers and comparatively weak demand for automation equipment there. However, the president stresses, once the Indonesian market matures, the current efforts paid by Hi-More will surely pay off.

 

  Preview of Hot Issues in July: Taichung Industrial Automation Exhibition

The July issue of Hi-More Newsletter will provide readers a close look at the upcoming Taichung Industrial Automation Exhibition, to be held July 11-15 in Greater Taichung International Expo Center, at which Hi-More is expected to gain more steam as the sun shines hot and delivers energy in the month.




 
  

  

Chen notes that Hi-More will showcase brand new robotic arm series and a slate of IoT-enabled models at the show, to offer more innovative, practical options to global buyers.

 


iMonster’s Digest

 

Despite mostly small and medium in size, most Taiwanese traditional manufacturers have successfully adapted themselves to the ever-changing, competitive global market, mainly thanks to their making good use of limited resources to cultivate exceptional flexibility and custom manufacturing capability, the merits that enable them to effectively upstage rivals and better satisfy customers. However, resource limitation hinders them to invest in R&D or expand their scale, which are the commonly seen problems among them.

 

To address the problems, Vic Chen, who is the second-generation owner of Hi-More, has been trying to integrate the company’s R&D resources by employing product modularization and constructing a database of knowledge and experience passed down from the founders and first-generation managers, with an attempt to provide customers truly tailor-made robotic arms and customized solutions at lower cost. Frankly speaking, this is a rarely seen tactic in Taiwan’s traditional manufacturing industries, and so groundbreaking that Hi-More will hopefully set itself apart from rivals and skyrocket its business growth amid the current deepening row over protectionism.



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