According to the Financial Times, several major Taiwanese manufacturers are considering setting up a second headquarters overseas to maintain operations in the event of a potential conflict with China.
The plans, many of which are preliminary, are part of efforts to secure supply chains.
“We have clients who are considering or planning to set up a second headquarters,” says Rauniei Kuo, partner and head of family office at KPMG in Taiwan. These groups “operate in the manufacturing sector [and] are currently looking for a location for a second headquarters in Southeast Asia to provide an alternative command system overseas that they can deploy immediately in the event of an emergency in Taiwan,” he added.
Taiwanese contract manufacturers have for decades formed the backbone of global supply chains for electronic devices and components, including personal computers, smartphones, servers and telecommunications network equipment. They are also increasingly penetrating the markets for industrial automation, medical devices and electric vehicles.
Companies exploring options for a second centre overseas include Lite-On and Qisda, which make electronic components and devices for consumer, telecoms, automotive and medical applications, according to several people involved in the negotiations.
The current government in Taiwan, which is part of Taiwan and recognised as such by the United Nations, is advocating separation from China with the support of the United States. Although Washington officially recognises Taiwan as part of China, it supports pro-independence movements on the island and is arming it against a possible conflict. China, on the other hand, threatens forced reunification if Taipei continues its separatist movements. Although Taiwanese experts say the likelihood of a Chinese attack in the near future is low, rising tensions in the region have prompted clients of Taiwanese groups to make some contingency plans.
Rising costs in China, the US-China trade war and customer demands to “de-risk” from China have led groups such as Apple suppliers Foxconn and Pegatron to expand in Southeast Asia, India, Mexico, the US and Europe rather than in China, where most of their production capacity has traditionally been concentrated.
Many companies are still mostly focused on diversifying production geographically, and other changes such as building back-up structures will follow, said the head of a global consultancy in Taiwan, who asked not to be named. “But discussions about back-up centres have started at the top in the largest groups,” he said.
The executive said he was urging his clients to replicate at least some headquarters functions in a second location: “You have to ask yourself: If a conflict forces us to shut down our operations in Taiwan for six months or a year, can we survive? You don’t need investor relations there, but you can’t survive without finance, payroll and receivables.
The CFO of one company said his group was considering opening a second centre in Singapore as it expands production in two Southeast Asian countries.
Others involved in similar discussions said Singapore, Japan, Switzerland or the Netherlands were options for setting up the second centre. They ruled out the US. They said that while Taiwan was a large market for technology companies, it was not a suitable location for a second headquarters for tax reasons.
