For some Taiwanese manufacturers, China isn't an option anymore, not since the mainland began tightening the screws on labor, environmental and safety regulations in recent years. Some producers have moved to Vietnam. Others have quietly returned home.
"In Southern China, we had control over nothing," says one manufacturer of lighting fixtures, explaining that angry Chinese vendors occupied his factory in Guangdong province and beat up his lawyer after he posted a notice that the plant was closing down. The 43-year-old businessman, who declined to be identified for fear of retribution, says he is trying to rebuild his business on the outskirts of Taipei.
"We can do it without China," he insists. "Before China, there was Taiwan."
Taiwan still has a solid base of metal-processing shops. Unlike Japan and South Korea, Taiwan isn't as dependent on lumbering conglomerates. At the heart of its economy are small businesses, which are inherently more nimble and flexible.
Some Taiwanese see a future in designing and making niche products in smaller quantities, be they high-end bicycles or cultural goods such as fine tea sets.
Charlie Hsu's company, Taoyuan-based Chenfull International Co., started out in the mid-1970s selling shoe-making equipment. He has since diversified into precision machining, engineering services and water-treatment systems. The 59-year-old expects sales to grow 10% this year from $70 million in 2008.
"They need this know-how and technology, and we need their market," he says of China.
Other Taiwanese manufacturers in China, disillusioned by what's happened, find themselves looking for Plan B.
"The golden period is over now," says J.C. Chiu, who went to the mainland in 1990 because he had trouble finding enough workers to expand his lamp business in Taipei.
At its peak a few years ago, Chiu employed more than 2,000 people at two factories in Dongguan, producing building materials and lamps for Wal-Mart Stores Inc., Home Depot Inc. and Lowe's Cos. His annual sales ballooned to $30 million.
But he lost $2 million last year, Chiu says. This year he shut down one of the two plants. His orders for 2009 are down more than 50% from a year earlier.
"If the situation keeps deteriorating," he says, "I will definitely close up [in Dongguan] and go back to Taipei."