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With rising production cost in China, Pegatron moves to Indonesia and Vietnam

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Pegatron, a Taiwanese company which is the world’s second largest contract manufacturer of electronics is reportedly planning to setup and run new factories in Indonesia and Vietnam by the end of this year.

With such as move, the company will essentially be shifting its production away from China as the production cost are rising because of higher labor costs as well as the on-going U.S.-China trade war. Further, the move is also aimed at diversifying production regions.

Pegatron Electronics Manufacturing

In an interview, Tung Tzu-hsien, Chairman of Pegatron said that China “has not been an optimum manufacturing location since more than five years.” He also added that when the U.S. President Donald Trump “threw a stone, diversification of production began like tumbling building blocks.”

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Sharing details about the company’s new plans in Indonesia and Vietnam, Tung said that these new plants will make devices for internet connectivity. The Indonesian plant will on Batam Island, about 20 km from Singapore, while the Vietnamese plant will be in the north of that country.

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Further, the company plans to expand domestic production lines in response to Taiwanese President Tsai Ing-wen’s policy of promoting local manufacturing. Pegatron makes a wide range of devices, including Apple iPhones, under contract. It is second only to fellow Taiwanese company Hon Hai Precision Industry, better known as Foxconn

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While some of the leading smartphone makers have established their manufacturing facilities in India and are doubling down on that, Pegatron is not ready to do so. Commenting on this, Tung said that India “is an important option, but we haven’t obtained consent from our customers.”

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