To mitigate the impact of the trade war between the United States and China, it is reported that the major iPhone assembly plants and Heshuo have selected Indonesia as the first step in their plans to divert production lines and decentralize manufacturing bases from the mainland of China.
Nikkei News quoted sources as saying that Heshuo was prepared to be shocked by US tariffs within six months and relocated non-iPhone products manufactured from China to leased factories on Batam Island, Indonesia. Sources familiar with the plan said that products moving to Indonesia, including set-top boxes and other smart devices, would generate annual revenue of nearly $1 billion. Relevant investment will start this month and full production is expected by mid-2019.
Another source revealed that the investment will be made at the end of this month or at the latest early next month, because it will take two seasons for Heshuo to relocate, install and confirm the equipment before the plant is fully operational.
Heshuo is relocating production lines by leasing rather than building new factories to ensure that production can be done as soon as possible in order to speed up the relocation of equipment from mainland China.
Although it is reported that Heshuo is also evaluating the feasibility of northern Vietnam as another manufacturing site, it may have invested more quickly in Batam than elsewhere.
Heshuo OEM has a history of 10 years. In July 2007, Asus Computer announced the division of brand and OEM, leaving the brand business in Asus, while OEM business was divided into Heshuo and Yongshuo. In November 2013, Heshuo announced the merger of its subsidiary Yongshuo. In 2017, it ranked 296 in Fortune 500. From January to June 2018, revenue was NT$552.08.6 billion, or about NT$12.177.92 billion.
And unlike Foxconn, Heshuo has different names in different places in mainland China. Heshuo has the following names in mainland China: Changshuo in Shanghai, Mingsuo in Suzhou, Shishuo in Kunshan and Xushuo in Chongqing. These companies are actually subsidiaries of Heshuo and are also the representative factories of Apple in mainland China.
Heshuo's latest move highlights the increased pressure faced by manufacturers in mainland China in recent years, including the impact of the trade war between the United States and China, rising wages and labor shortages in China. Heshuo is not the first, and certainly not the last, manufacturer to transfer production lines. Recently, it has also indicated its intention to move non-Apple product lines from mainland China, including Weichuang, Quanta, Renbao and Yingda.
Although Heshuofang said that the case of setting up factories in Southeast Asia is still in the stage of preparation and investigation, and has not yet been finalized, he also did not comment on the rumor of setting up factories in Indonesia. This trend seems to be fermenting in the dark and bright. What impact will it have on the mainland's electronics manufacturing industry, and how to deal with it, still need continuous attention.