“Keeping Taiwan’s high-tech edge"

Keeping Taiwan’s High-tech edge, From the McKinsey Quarterly, Special to CNET News.com. May 24, 2003, 6:00 AM PT.

“The move to China has already proven to be beneficial–the original-design manufacturers quickly reduced their total manufacturing costs roughly 10 percent to 30 percent, depending on the type of business. Relocation not only helped lower their labor costs in general but also provided them with access to China’s large pool of engineering talent and with proximity to a big and rapidly growing domestic market…..

Many of the world’s best manufacturers have taken that route, but most of Taiwan’s high-tech original-design manufacturers, accustomed to years of fast growth and large profit margins, have felt no need to undergo the comprehensive changes in organization that a lean-manufacturing program requires. ….

Despite these difficulties, lean manufacturing in China offers substantial benefits to original-design manufacturers. Few may feel that they are in immediate danger, but several depend on only two customers for up to 60 percent of their revenue. If Taiwanese electronics manufacturers can’t match their overseas competitors’ operational productivity, their share of the world’s markets for high-tech products may shrink surprisingly quickly."

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