Compal to build laptop plant in western China

TAIPEI, TAIWAN: Taiwan laptop PC contract maker Compal Electronics Inc plans to build a new plant in the Chinese city of Chengdu, joining other global tech firms to expand into the country's interior in the face of rising labour costs in the southern factory belt.

Chief Financial Officer Gary Lu said on Wednesday that Compal has signed a memorandum of understanding (MOU) with Chengdu city government to build the plant, while both sides were still negotiating details.

"Customers are moving to the west, so we have to go with them. Everybody is doing this and it is a trend," said Lu, adding that Compal's board would finalise the plan by the end of October at the earliest.

Compal and local rival Quanta Computer Inc are major suppliers to top brands such as Hewlett-Packard Co and Dell Inc. Dell said earlier this month it plans a new production base in Chengdu.

Compal's shares rose 1.2 percent, outpacing the main TAIEX's 0.6 percent gain.

A Chengdu daily newspaper said on Tuesday that Compal's new plant, with total investment of more than $500 million, is set to start producing in April 2011, helping boost the company's total laptop capacity to 10 million units next year and then double to 20 million units in 2013.

Taiwan's Hon Hai Precision Industry Co Ltd, which assembles PCs and cellphones for the world's top tech brands, has said it will raise its total Chinese workforce by over 40 percent by next year but shift expansion inland and away from its plant in far southern Shenzhen.

Earlier this month, China's government said it will intensify efforts to draw factories inland from crowded coastal regions to keep manufacturing competitive and encourage job growth closer to the homes of China's vast rural population, which has long provided cheap factory labour.