Manufacturing In Taiwan Vs. Mainland China
If you actually look at the industrial robots and manufacturing equipment in these two countries, you might be shocked to learn that there is a higher density within Taiwan.
Peoples’ perception is that China is full of industrial robots, but actually, Taiwan has the 10th highest “robot density” in the world of manufacturing compared to China in 23rd place. Of course, Taiwan is smaller than China, and may not make as many global headlines, but that doesn’t mean it isn’t an option for your next manufacturing project.
Labor costs in China have grown somewhat, and importers are looking elsewhere for competition. Taiwan, which is not far away geographically, is a manufacturing hotspot. So what are the differences? Is it worth considering working with Taiwanese companies?
What are the perceptions when someone sees the “made in Taiwan” logo? Is it as prestigious as other parts of the world, and do customers even care where the products are made? Taiwan could be your manufacturing secret weapon.
Taiwan Industrial Specialisms
There aren’t many items that you can’t source in China if you want to, but is it better to search for countries with more specialist knowledge?
Mainland China remains the manufacturing capital, but for some products, it may not be the wisest choice. Is it possible to switch manufacturing to Taiwan?
Consumer Goods and Intermediate Goods
The differences in manufacturing are incredibly nuanced based on industry, and which manufacturer you decide to work with. If we were to break down the differences between Taiwan and China for manufacturing, you can get a rough idea with one sentence:
Mainland China is known for consumer goods, whereas Taiwan traditionally specializes in more intermediate products.
This is a large generalization, but usually rings true. Taiwanese products are sold as part of the production of other goods rather than the full direct to customers as a complete product.
It’s useful to use the car industry as an example. Instead of buying the full car from China, or even the full engine, you might buy individual components, made in Taiwan.
Just under 80% of the exports from Taiwan are intermediate goods rather than full consumer goods. Intermediate goods make up around 40% of China’s exports. A huge percentage of OEM manufacturers from Taiwan produce things like electronic components.
The biggest industries in Taiwan include:
Electrical machinery and components
Plastics and derivatives
Optical and medical equipment
Oil and other fuels
Cars and other vehicles
What is the significance of this? Well, if you want something outside of these areas then you may struggle to find a company that has a brilliant reputation. For instance, garment manufacturing is something that is very popular in India, Pakistan, Bangladesh, Turkey, and China, but Taiwan is not known for this. However, if you want something like electronics, computing parts and medical devices, Taiwan is extremely strong, even when compared to China. Of course, this is speaking generally, and it is still worth doing some research to ensure that you are working with a trusted and reliable company.
Taiwan has identified industries to invest heavily in, as the government tries to improve trade around smart machinery, biomedical, Internet of Things (IoT), green energy and defense.
$3.3 billion has been set aside for the infrastructure as well as research and development, as Taiwan’s suppliers grow to compete with suppliers all over the world. If your business is within one of these industries, or a related industry, you may benefit from the infrastructure growth when working with Taiwanese countries.
Cost of Manufacturing
The cost of manufacturing can be the difference between a profitable business and a failing business. Taiwanese companies would historically manufacture within China to take advantage of lower labor costs, but over the years, these costs have become closer between the two regions. Some Taiwanese firms have taken their operations out of China, so it isn’t always cheaper.
Though China doesn’t have a minimum wage for the whole country, regional minimum wages are usually far lower than that of Taiwan. However, the cost of employing someone is not the only thing that goes into manufacturing costs. Productivity is hugely important, and some data from the IMF suggests surprising findings that may lead people to Taiwan.
Productivity is calculated by rate of output per unit of input. GDP per capita is another common measurement, taking the output of goods per member of the workforce. You don’t have to know exactly how the data is calculated, but it may inform your decision if you learn that Taiwan has been shown to be around three times as productive in certain industries. Taiwan’s GDP per capita ranks with developed countries including Germany, whereas Chinas is closer to that of countries like Mexico.
The Argument for China
There are some companies for whom working with Chinese manufacturers still makes perfect sense. While there have been rising costs in the country, many industries still find it affordable.
China has a huge labor pool, and if you can find the specific skills you are looking for by working with the right manufacturer, you might find the product quality to be very high.
Economies of scale should also be considered. A lot of mainland China facilities are working with huge capacity and on large scale projects,, which means their costs may be reduced, for instance for raw materials. This saving might be passed on to the customer, especially if ordering in large quantities.
Buyers can also take advantage of a huge network of both factories and logistics companies. It’s easy to assume that working with Chinese companies is more straightforward.
China undeniably has a huge supply chain network. However, the “Doing Business” report by World Bank is yet another ace in the pack for Taiwanese companies. Doing Business provides multiple metrics regarding trade, including reports on trading across borders. Taiwan ranks better than mainland China on all of these metrics, meaning it is easier to trade with Taiwanese companies. Considerations like enforcing contracts, taxes, and the ease of transport were taken into account. Taiwan is one of the leaders in the whole of the East of Asia.
While China ranks 10th in East Asia for ease of doing business, Taiwan is third, behind Singapore and Hong Kong.
To further add to the case for doing business within Taiwan, is the consideration of how easy it is to travel to the country. In China, a visa must be acquired for the majority of people to visit. Citizens of the US, UK, European Union, Canada, Australia and many other countries can actually travel in Taiwan with no need for a visa. This means that visiting potential factories and setting up meetings can be far more simple and straightforward.
Whichever side of the Strait you decide to do business, it is vital to find the right manufacturer for your own needs. There is a skill involved in garnering these productive relationships. So, should you opt for manufacturing in Taiwan or in mainland China?
Your ideal partnership might be in China, with its thousands of factories and manufacturing history, but a look at the statistics shows that Taiwan should also be considered, especially in some industries such as automotive, computing, and chemicals. Both Taiwan and China are exciting prospects for manufacturing products for the western market. Taiwan can even be a more straightforward option for those who want a seamless process, and to visit their potential manufacturing facility before taking the plunge and handing out a big contract.