Following requests from SpaceX, Taiwanese suppliers are moving production abroad, sources say
By Francesco Guarascio, Khanh Vu and Ben Blanchard
HANOI/TAIPEI (Reuters) – Elon Musk's SpaceX has asked Taiwanese suppliers to move production off the island, leading to a relocation of parts of their supply chain, according to sources employed by and close to the equipment makers and company documents.
A source at a company that is one of several subcontractors supplying components for SpaceX's Starlink satellite internet products said SpaceX asked their manufacturers to produce outside Taiwan due to geopolitical risks, forcing at least one company to shift production to Vietnam.
A second source who works with Taiwanese satellite component makers on the island said suppliers had been asked directly by SpaceX to transfer production abroad.
Chin-Poon Industrial, a satellite component manufacturer that said it had recently become a SpaceX supplier, told Reuters that the U.S. company had asked to move their production from Taiwan to Thailand for new orders “mainly due to geopolitical considerations.” It was not elaborated.
The sources declined to be identified because the information was not public. SpaceX did not respond to requests for comment.
SpaceX's requests put a renewed focus on the contentious relationship Musk has had with Taiwan, especially after he said last year that it is an “integral part” of China, drawing sharp criticism from the Taiwanese government.
China considers democratically governed Taiwan its own territory and has held military exercises around it almost daily for the past five years and has never refrained from taking the island by force. Taiwan rejects Chinese sovereignty claims.
China's drills have increased in intensity since 2022, with the latest war games the country carried out last month simulating a blockade of the island. Amid the possibility of devastating disruptions to their supply chains, some Taiwanese companies in the strategic satellite and semiconductor industries are taking steps to reduce their dependence on domestic manufacturing.
A Vietnam-based investment adviser told Reuters in October that SpaceX representatives said at a private meeting in March 2023 that the company was interested in setting up a satellite equipment manufacturing center in Vietnam and was seeking advice on intellectual property protection.
When contacted by Reuters about Taiwanese SpaceX suppliers moving abroad, Taiwan's Ministry of Economic Affairs responded: “Short-term political factors should not affect the relationship between the international satellite companies and Taiwanese manufacturers.”
EXPANSION OF VIETNAM
Taiwanese SpaceX supplier Wistron NeWeb Corporation (WNC) this year started producing routers and other networking equipment for Starlink at its factory in North Vietnam's Hanam province, about an hour south of Hanoi, two employees at the factory said and a contractor.
WNC's expansion in Vietnam is largely due to orders from SpaceX, one of the employees said.
The Hanam factory plans to at least double its workforce from 3,000, the contractor and one of the workers said. Outside the factory, several banners advertised job openings at the plant, Reuters reporters noted in mid-October.
The first source aware of SpaceX's requests to leave Taiwan is an employee of a Vietnam-based foreign supplier whose printed circuit board components are in Starlink's ground equipment through WNC-made components.
The source said a SpaceX supplier they work with that supplies WNC was ordered directly by SpaceX to produce off-island.
WNC declined to comment, citing customer confidentiality. Its latest annual report in April said: “In light of geopolitical risks and ever-changing customer demands, WNC has continued to expand its global manufacturing capabilities.”
Universal Microwave Technology, another SpaceX satellite component supplier and manufacturer, invested in a factory in Vietnam this year, according to a Taiwanese official and public company filings.
Universal Microwave Technology declined to comment on individual customers, citing confidentiality agreements, but said it was expanding its presence in Southeast Asia, including new factories in Thailand and Vietnam.
“Overseas production capacity planning will help customers reduce their doubts about geographic risks, gain customer recognition and increase customer cooperation,” the report said.
Taiwan has a large satellite industry, with about 50 companies producing ground-based equipment and sensitive components, according to the Ministry of Economy and industry data. The government estimates that the sector's output exceeded US$200 billion ($6.23 billion) last year.
SpaceX has about a dozen direct suppliers from Taiwan, which rely on dozens of domestic suppliers, according to the source who works with the island's satellite industry.
The Vietnamese government said in September that SpaceX wanted to invest $1.5 billion in the country, although the timing and purpose of the actual investments remain unclear.
Shenmao Technology, a supplier of soldering materials for printed circuit boards that has supplied components to SpaceX, said in April that it would spend $5 million to set up a unit in Vietnam, without saying who its customers would be for products from that facility . The company did not respond to a request for comment.
(Reporting by Francesco Guarascio and Khanh Vu in Hanoi and Hanam and Ben Blanchard in Taipei; additional reporting by Phuong Nguyen in Hanoi; Editing by Gerry Doyle and Christian Schmollinger)
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