Yageo Corporation recently broke ground on a new NT$5 billion ($175.4 million) Taiwan-based passive components manufacturing facility. The firm intends for the plant, located in Kaohsiung City, to become operational in August 2022.
The company is building the complex to bolster its production capacity and protect its supply chain from global volatility.
Yageo’s New Capacitor Plant
Although headquartered in New Taipei City, Yageo has not expanded its domestic production footprint in 15 years. However, the corporation broke with its old pattern in a major way with its Kaohsiung plant.
The facility will stand 10 stories tall, encompass 923,543 square feet, and employ 3,000 local workers. The factory will become the firm’s largest domestic production complex as it will be 1.3-times larger than its two neighboring facilities.
Upon going live, the Kaohsiung site will produce inductors, chip resistors, and multilayer ceramic capacitors (MLCCs.) Yageo has committed to spending NT$13 billion to NT$15 billion ($455.6 million to $525.7 million) to equip the plant with state-of-the-art production equipment.
Although the manufacturer is the world’s third-largest passive components maker, it wants to occupy the number one sport. The new complex will increase its output because the site will enable the corporation to increase its monthly domestic MLCC output from 50 billion units to 60 million units.
A Larger Strategy
In the last two years, Yageo has aggressively expanded its global market presence with two high-dollar corporate acquisitions. In 2019, the corporation spent $740 million to acquire Pulse Electronics and $1.8 billion the following year to snap up KEMET. The two transactions helped the firm grow its wireless components and capacitor portfolios as well as its business.
Yageo’s new Taiwanese factory will play an important role in furthering its long-term expansion strategy. It will also help the corporation mitigate the risks posed by the coronavirus pandemic and U.S.-China trade war.
On the first count, the firm’s Kaohsiung production facility will give it greater resources outside of the Chinese mainland. When another globally disruptive event unfolds, its manufacturing diversity will improve its operational resiliency.
Regarding the second issue, centering 60 percent of its MLCC production capacity in Taiwan is good for its foreign business. Since it began in 2018, the Chinese-American trade conflict prompted a series of tariffs and retaliatory tariffs. As a consequence, manufacturers with plants in either region took a hit to their profitability.
That means Yageo’s new facility will help grow its revenue and net income.