Electronics assembler Pegatron to set up Vietnam manufacturing subsidiary for Southeast Asia expansion

19, Feb. 2020

Photo by Marvin Meyer on Unsplash
Photo by Marvin Meyer on Unsplash

TAIPEI, NNA – Electronics assembler Pegatron Corp. will set up a manufacturing subsidiary in Vietnam with $150 million in capital, a reweighting to Southeast Asia as the coronavirus epidemic hobbles the economy of China.

The wholly-owned subsidiary, Pegatron Vietnam Co., will increase the Taiwanese assembler’s manufacturing work in Southeast Asia, a company spokeswoman told NNA Tuesday.

“Pegatron sees Vietnam as an ideal location because of strengths such as having a rather well-formed supply chain and a proximity to China,” she said. “A cluster effect therefore is anticipated.”

The spokeswoman would not disclose the plant’s capacity and anticipated operation scale. Those details will emerge later, she said, as the company is now focused on finding a proper site.

Pegatron’s new plant will make electronics based on what clients want. Its China factories assemble some of Apple’s iPhones, market researchers in Taiwan have said. “We are still in discussion with our clients,” the spokeswoman said.

She dismissed a Taiwan’s Commercial Times report that it says the factory will make Surface laptops designed by Microsoft.

Pegatron first reached Southeast Asia in 2019 when it set up Indonesia factories to make network communication gear and consumer products. It sighted Indonesia to avoid paying U.S. tariffs on goods shipped from China, the spokeswoman said.

Manufacturers have added investments in Vietnam over the past eight years as labor and land costs rise in China. The Sino-U.S. trade dispute steered more investments to Vietnam, where prices are cheaper and U.S. tariffs lower. COVID-19 disrupted the China consumer electronics supply chain this month because the government added a week to the Lunar New Year holiday break as a disease control measure.

Pegatron’s factories in central Chinese province of Sichuan and the cities of Shanghai and Suzhou will still operate after the Vietnam plant opens, the spokeswoman said. “Some of our clients are free from the impacts linking to the tariff war,” she said.

But the spokeswoman said COVID-19, which has killed over 2,000 people by Wednesday, has slowed her firm’s production there. “We will keep a keen eye on the possible impact on our first quarter performance,” she said.

Pegatron reported January revenue of 95.7 billion New Taiwan dollars ($3.2 billion), a 25.7 percent month-on-month decline and 22 percent fall year on year, according to a monthly financial statement.