Building Taiwanese Brands and Offshoring to Asia

I’ve got little time to comment on it, but there was in interesting article in Business Week a few weeks ago about Taiwanese firms who are building their brand names.

Yes, guys, that’s exactly what you ought to be doing, since manufacturing has been moving to China for the past ten years. Sure, a large percentage of the really profitable factories in China are owned by Taiwanese companies, but you’re going to have to emulate South Korea, Japan, and Hong Kong in building global brands if you hope to grow the economy in the future. Right now we’ve got what, Acer, BenQ, Giant bicycle, and a few specialty market brands going? As they say in China and Taiwan, Jia You (General cheer, go for it, etc.).

The magazine issue had a little side bar about how US manufacturers aren’t really profitable anymore. I’d hate to be one of those guys, hate to see what’s happened to them, even though I understand the inevitability of it all.

In my experience, the big manufacturers have already relocated to Asia or sold out to Asian companies. The medium-sized companies have either already moved, are investigating a move, or will soon start investigating a move. It is the little manufacturers in the US, with a few hundred employees, who worry me. Here’s what I think:

Let’s say you’re a US manufacturer with 300 employees. You’re getting killed on price due to imports from overseas. Your business is shrinking. You don’t have the money to a build or strengthen your brand or develop a new product line.

You’ve got two choices.

Choice A: Continue to fight it out in the USA and risk the loss of 300 jobs.

Choice B: Move your factory to China, India, Vietnam, or a SE Asian country and keep 120 jobs (i.e. the engineers, accountants, sales and marketing people, management staff).

Don’t get me wrong. I fully support the growth and development of American businesses. I’m also a pragmatist. If your company is dying, you have to find a way to keep it alive, even if it means losing some people you care about. Hell, I cut myself out of a plum job some years back because the company had a financial crisis and I was the highest paid guy there, after the boss. I landed on my feet, and others will too, especially if they get a little help. If you’ve got the resources, you can help those people get some training or into jobs that have some kind of future. I’d do that if I were the boss, even at the expense of my BMW and eight bedroom home.

If you’re thinking about moving some of your manufacturing work to Asia, drop me a note. I’ll give you some guidance that may just save you a lot of headaches (and money).

Taiwanese Investment in Vietnam

This is one of the more interesting phenomenons in East Asian investment. Recently in Taipei, I’ve run into more and more people who have friends or relatives working in Vietnam. A training client’s husband, a friend of my wifes, our interior decorator’s husband…all of them are working in Vietnam.

A quote from a Vietnam business forum:

As of August 22, 2007, Taiwan has invested roughly US$9.175 billion in 1,706 projects in Vietnam, ranking third among 79 countries and territories with investment capital in Vietnam. In the first eight months of 2007 alone, Taiwanese investors were licensed to invest US$600.5 million in 134 projects and allowed to increase US$279 million in 59 projects.

Several business investors I’ve spoken too have said that Vietnam is the next China; labor is cheaper, the workforce is well-educated and hard working, there are fewer government restrictions on investment.

If you’re considering an OEM relationship overseas, it might be worth giving Vietnam a look. Rule of thumb in manufacturing: Go where the Taiwanese go.