If you work with Taiwan suppliers, you have certainly received a number of messages of price increment since 2017.
The Taiwanese manufactures have been increasing price significantly by between 8-20 per cent during 2017. Many our customers curious about the reason of price increment and we would like to explain the truth behind the price raising.
There are three major factors caused the significant price rising:
1. Exchange Rate:
The exchange rate has an effect on the trade surplus (or deficit), which in turn affects the exchange rate, and so on. In general, however, a weaker domestic currency stimulates exports and makes imports more expensive. Conversely, a strong domestic currency hampers exports and makes imports cheaper.
Since the beginning of 2017, the NT dollar has being appreciated US dollar around 7% which makes exports more expensive for Taiwanese companies.
*Reference(1): CNYes http://www.cnyes.com/forex/html5chart.aspx?fccode=USD/TWD&rate=exchange
2. Wage Rise:
The Ministry of Labor approved a 5 percent increase to the monthly minimum wage, effective Jan. 01, 2017 and also new labor law, “one fixed day off and one flexible rest day”, launched since December, 2016 which including changes of weekly days off, overtime payment rise and increasing days of annual leave.
Since the law kicked in, many Taiwanese factories have complained about the increased cost of overtime and even difficulty scheduling workers' shifts.
Therefore, these changes have caused the significantly rise on labor cost.
*Reference(2): Businesses feel pinch of new labor law amendment http://www.taiwannews.com.tw/en/news/3062595
*Reference(3): Taiwan labor ministry explains newly passed Labor Standards Act amendment http://www.taiwannews.com.tw/en/news/3046359
*Reference(4): Taiwan Basic Labor Salary (1997-2017) From Workforce Development Agency
3. Raw Material Price Rise:
Raw material prices are critical and can have a significant impact on your operational margin. According to local news reports, the price hike is a reaction to the jump in raw material prices.
The prices of plastic material increase by between 51-92 per cent since 2016 while the steel and iron material price increasing about 16-17 per cent.
Of course, the material price goes up by 50% do not mean the total product price also go up by 50%. It depends on the percentage of that material in the final cost in your product. For example: a forged metal part, metal consumption is the highest cost contributor, therefore a proportional increase makes sense.
*Reference (5): Taiwan Plastic Price (From:Taiwan Plastic Industry Association http://www.ttpia.org.tw/front/bin/home.phtml)
*Reference (6): Taiwan SE STEEL & IRON price (From: FINANCIAL TIMES https://markets.ft.com/data/indices/tearsheet/summary?s=SLX:TAI)
As a summary, compare with buying from China, Taiwanese supplier normally will not easily raise the price unless various environment factors that impact their cost. Also, you can ensure the price from Huang Buffalo who helps our customer justify the price from manufacturers and avoid lame excuse to increase their margin.