TAIPEI — Key iPhone assembler Pegatron has chosen Indonesia/Singapore for its first diversification of manufacturing away from China in the wake of costly trade tensions between Washington and Beijing.
The Taiwan-based electronics manufacturer is preparing to shift production of non-iPhone products hit by U.S. tariffs on Chinese exports to a rented factory on Indonesia’s Batam Island within the next six months.
Batam is an industrial boomtown, an emerging transport hub, and part of a free trade zone in the Indonesia–Malaysia–Singapore Growth Triangle, located 20 km (12 mi) off Singapore’s south coast. It links the infrastructure, capital, and expertise of Singapore with the natural and labour resources and the abundance of land of Johor and Riau. It is also part of the Indonesia–Malaysia–Thailand Growth Triangle.
A source with knowledge of the plan said the products — which include set-top boxes and other smart devices — accounted for close to $1 billion in annual revenue. Investment would start within the month, with full production expected by the middle of 2019, the person said.
Pegatron’s move highlights the growing pressure on many Taiwanese manufacturers who have expanded in China in recent years and now find themselves squeezed by trade tensions, the country’s rising wages and labor shortages.
“The investment will be made either by the end of this month or at the beginning of next month at the latest, as it will require two quarters for Pegatron to move, install, and certify equipment before the plant becomes fully operational,” another person who familiar with the plan said. “This cannot be delayed for long,” the person added.