SpaceX Shifts Manufacturing Out of Taiwan

By Francesco Guarascio, Khanh Vu and Ben Blanchard

HANOI/TAIPEI (Reuters) – Elon Musk's SpaceX has requested Taiwanese suppliers to shift manufacturing operations off the island, prompting some to relocate portions of their supply chains, according to sources close to various equipment makers and corporate documents.

A source at a company supplying components for SpaceX's Starlink satellite internet stated that SpaceX requested their manufacturers to produce outside Taiwan due to geopolitical risks, leading at least one firm to move production to Vietnam.

Another source collaborating with Taiwanese satellite component makers mentioned that suppliers were directly urged by SpaceX to transfer manufacturing abroad.

Chin-Poon Industrial, a satellite component manufacturer and recent SpaceX supplier, noted that SpaceX requested they move their production from Taiwan to Thailand for new orders, citing "mostly geopolitical considerations." Details were not disclosed.

Sources chose to remain anonymous as the information was not publicly available. SpaceX did not respond to requests for comment.

These developments rekindle attention on Musk's contentious relationship with Taiwan, especially after he referred to it as an "integral part" of China last year, resulting in significant criticism from the Taiwanese government.

China regards Taiwan as part of its territory and has conducted nearly daily military drills in the region over the past five years, never ruling out the use of force to take control of the island. Taiwan, in contrast, rejects China's sovereignty claims.

Since 2022, the frequency and intensity of China's military drills have escalated, with recent exercises simulating a blockade of Taiwan. In light of potential disruptions to their supply chains, several Taiwanese companies in strategic sectors such as satellites and semiconductors are taking measures to lessen their dependence on local manufacturing.

In a private March 2023 meeting, a Vietnam-based investment adviser mentioned SpaceX representatives expressed interest in establishing a manufacturing hub for satellite equipment in Vietnam and sought guidance on intellectual property protection.

Responding to queries regarding Taiwanese SpaceX suppliers moving abroad, Taiwan's economy ministry stated, "Short-term political factors should not affect the supply chain relationship between international satellite companies and Taiwan manufacturers."

Vietnam Expansion

This year, Wistron NeWeb Corporation (WNC), a Taiwanese SpaceX supplier, began producing routers and other network equipment for Starlink in its factory located in northern Vietnam's Hanam province, approximately one hour south of Hanoi, as confirmed by two workers and a contractor at the facility.

WNC's expansion in Vietnam is largely attributable to orders from SpaceX, one worker reported. The Hanam factory aims to at least double its workforce of around 3,000, according to the contractor and one of the workers, who noted job advertisements outside the factory in mid-October.

The first source familiar with SpaceX's request to move production out of Taiwan works for a Vietnam-based foreign supplier whose components for printed circuit boards are part of Starlink's ground equipment through WNC-made components. This source revealed that a SpaceX vendor supplying WNC was explicitly instructed by SpaceX to produce outside of Taiwan.

WNC chose not to comment, citing customer confidentiality. In its latest annual report from April, the company stated: "In the face of geopolitical risks and ever-changing customer requirements, WNC has continued to expand its global manufacturing capabilities."

Another SpaceX supplier, Universal Microwave Technology, known for manufacturing satellite components, has invested in a factory in Vietnam this year, according to a Taiwanese official and public records. While they declined to comment on specific clients due to confidentiality agreements, they acknowledged expanding their footprint in Southeast Asia, including new factories in Thailand and Vietnam. They stated, "Planning overseas production capacity will help customers reduce their doubts about geographical risks, gain customer recognition, and increase the breadth of cooperation with customers."

Taiwan has a vibrant satellite industry with around 50 companies producing ground equipment and critical components, as reported by the economy ministry and industry statistics, with output valued at over T$200 billion ($6.23 billion) last year.

SpaceX relies on about a dozen direct suppliers from Taiwan, which depend on numerous domestic vendors for their operations, according to the source engaged with the island's satellite sector.

In September, Vietnam's government reported that SpaceX expressed intentions to invest $1.5 billion in the country, although the specifics and timing of those investments remain unclear.

Shenmao Technology, known for supplying soldering materials for printed circuit boards and a previous component provider to SpaceX, announced plans in April to allocate $5 million to establish a unit in Vietnam, without disclosing intended clients for the facility's products. The company did not respond to requests for comments.