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Location Selection of High-tech Manufacturing Firms by a Fuzzy Analytic Network Process: A Case Study of Taiwan High-tech Industry

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Abstract

The high-tech industry has great potentials in global economy and plays an important driving force in global manufacturing operations. However, high-tech firms sometimes have to deal with high-risk potentials such as limitation of human resources, powerful competitors, and high ratio of natural disasters. An alternative solution to overcome these issues is to seek a new place for locating manufacturing plants. In addition, the selection of the new location is a form of business expansion outside origin location which can strengthen firm’s position at the global level. This study presents a novel framework of location selection using fuzzy analytic network process to determine prospective manufacturing location and applies to Taiwan hi-tech firms in selecting China regions as the research subject. We conduct survey to 16 firms which are categorized into two groups (small-medium and large firms). Following our proposed location selection framework, we conclude that the two groups have different priorities of location determinants and location ranks. In choosing a location, small-medium firms prioritize cost rather than regulation and community, while large firms prioritize regulation rather than cost and community. In terms of location selection, both groups are prioritizing Central-Western China as their first choice.

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Acknowledgments

The authors gratefully acknowledge the comments and suggestions of the editor and the anonymous referees. This work is partially supported by the Ministry of Science and Technology and Ministry of Education, R.O.C. (Taiwan).

Author information

Authors and Affiliations

  1. Department of Industrial Management, National Taiwan University of Science and Technology, #43, Sec.4, Keelung Rd., Taipei, 106, Taiwan, ROC

    Kung-Jeng Wang & Vo Ngoc Bao Tran

  2. School of Business and Management, Institut Teknologi Bandung, Bandung, Indonesia

    Yuliani Dwi Lestari

Authors
  1. Kung-Jeng Wang
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  2. Yuliani Dwi Lestari
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  3. Vo Ngoc Bao Tran
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Corresponding author

Correspondence to Kung-Jeng Wang.

Appendices

Appendix 1: Location Determinant Definition

  1. 1.

    Cost

    • Labor cost (LbC): The sum of all wages is paid to employees, as well as the cost of employee benefits but payroll taxes are paid by an employer.

    • Transportation cost (TC): The expenses occur when a company transfers its inventory or other assets to another location.

    • Land cost (LC): The total expenditures on land for establishing factory in China

    • Material cost (MC): The total expense on materials that regularly used for production

  2. 2.

    Community

    • Infrastructure, housing and education (HE): Availability of accommodations, housing and education facilities in the community which are suitable for labor.

    • Innovation based and R&D cluster (RDC): Availability of Research and Development Center/Institutes in the community which is capable to support firm operational process.

    • Manufacturing and service concentration (MC): Concentration of manufacturing and service activities which also provide adequate labor pool and supply network to support firm production, operation, and management

    • Industrial linkages (IL): Availability of complementary industries, external economies and special services for high-tech firms

    • Market (M): Potential sales volume that firm can achieve in the local community

  3. 3.

    Province Regulation

    • Tax reduction (TR): Tax reduction policies which applied for the high-tech firms in the area.

    • FDI incentive (FDII): Foreign Direct Investment Incentive policies which imposed for the high-tech firms in the area.

    • Finance provider (FP): Availability of financial provider.

Appendix 2: Location Alternatives

Taiwan: The island of Taiwan, in Eastern Asia, is about 161 km away from the southeast part of mainland China, and about 483 km north of the Philippine island of Luzon. Taiwan’s hi-tech industry has played a central role in the global market, having distinguished itself with its complete supply chain, significant clustering effect, and proven abilities in contract wafer manufacturing during three decades of development.

Bohai Economic Rim: the economic zone encompasses Beijing, Tianjin, Hebei, and Shandong Peninsula in the Bohai Sea rim area. The region also includes Shanxi and the central part of Inner Mongolia. This region has gone through major changes in economic and infrastructures, accounting for about 5 % of China’s total land area.

Yangtze River Delta: is one of the largest economic regions in China, mainly comprising Shanghai, southern Jiangsu, and northern Zhejiang provinces. The region is accounting for only 1 % of China’s total land area. However, with its superior geographical location, it has built a sound economic foundation, an advanced communication network, and well-developed secondary, S&T, cultural and educational industries. It ranks highest nationwide in terms of import–export volume.

Pearl River Delta: is an economic region consisting of nine major cities along the Pearl River in Guangdong Province, namely Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Zhaoqing, Jiangmen, Zhongshan, and Dongguan. It also includes the Hong Kong and Macao special administration regions. The region has become the fastest growing location of China and the manufacturing hub of both China and the world.

Central-Western China: is the largest region comparing with four others alternatives mention above, and the development of Central and Western China has become an important factor supporting China’s economic growth. With the new global economy challenge in the next decade, Central-Western China is the new attractive destination for foreign manufacturing investment.

Appendix 3: Super-Matrix and Limit Matrix

See Tables 11, 12, 13, and 14

Table 11 Super-matrix: small-medium firm
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Table 12 Limit matrix: small-medium firm
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Table 13 Super-matrix: large firm
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Table 14 Limit matrix: large firm
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Appendix 4: Sensitivity Analysis

LINE ANNOTATION

Taiwan: square line

Bohai Economic Rim: dash dot line

Yangtze River Delta: dot solid line

Pearl River Delta: triangle line

Central-Western China: solid line

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Wang, KJ., Lestari, Y.D. & Tran, V.N.B. Location Selection of High-tech Manufacturing Firms by a Fuzzy Analytic Network Process: A Case Study of Taiwan High-tech Industry. Int. J. Fuzzy Syst. 19, 1560–1584 (2017). https://doi.org/10.1007/s40815-016-0264-z

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