chapter  6
28 Pages

From NAFTA to China? Production Shifts and Their Implications for Taiwanese Firms

ByMarcos Ancelovici, Sara Jane McCaffrey

At the end of the 1990s, Hong Ho Precision Textile’s long-term outlook for production at home looked bleak. Like many Taiwan-based manufacturing companies, the firm saw opportunity in Mexico’s low labor costs, duty-free access to the U.S. market, and proximity to the U.S. border. In 1999 Hong Ho launched an ambitious program to build textile and garment production facilities in the southeastern state of Yucatan, with plans to invest US$60 million and hire 8,000 Mexican workers (EIU 1999, Bow 1999). Early returns were promising, and demand from U.S. customers strong. At the same time that Hong Ho announced a US$10 million investment in a Mainland Chinese textile factory, the firm continued to plan an expansion of production in Mexico (Taiwan Economic News 2003). But by April 2004, Hong Ho’s Mexico strategy had stalled: prices of NAFTA yarn proved too expensive and local subcontractors too scarce and unreliable. Hong Ho halted hiring at 1,500 workers and abandoned its circular knit operation (Just-Style 2004).