"[Mainland] companies are taking market share in China away from the Taiwan companies, and some of these China companies have even been qualified as suppliers to major customers such as Apple," Barclays' analysts led by Kirk Yang wrote in a report published on Wednesday.
"Besides their home-field advantage, the Chinese brands are now making high-quality, not just low-priced, products. China's government has supported the domestic brands given that it has banned non-Chinese products in such areas as servers and telecom equipment," Yang said.
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Furthermore, Taiwanese tech firms no longer enjoy a low-cost manufacturing base in China given rising wages and yuan appreciation.
Tech supply chain moving to China?
Chinese component makers are fast-movers, said Yang. They arehighly adaptive to market changes and new business opportunities, and are gaining share in traditional fiefdoms of Taiwan suppliers, especially batteries, casing, camera lens, handset antennas and LEDs.
"We believe that the rise of China's supply chain could be a disruptive force to some second-tier companies in Taiwan's supply chain, which lack any differentiating technology, scale or close relationships with China's domestic brands," he said.
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The number of Chinese component makers on Apple's 2013 direct supplier list rose to 12 from 7 in 2011. The total unit value of the components they supplied rose to $21.3 from $14.5, accounting for 11 percent of the iPhone bill of materials versus 7 percent in 2011, according to Barclays' estimates.