In the wake of rising wages in China, PC and component factories established there by Taiwan-based firms are looking to outsource labor-intensive portions of the manufacturing process to reduce production cost, according to sources with the supply chain.

The government in Shenzhen, southern China, has raised monthly minimum wage to CNY1,500 (US$238) since February 1, and the minimum wage in Shanghai will go up 13.28% from CNY1,280 to CNY1,450 starting from April 1, the sources said.

Taiwan-based EMS provider Foxconn Electronics (Hon Hai Precision Industry) has raised monthly salarties 15-25% for assembly line workers at all its factories in China, creating pressure on other Taiwan-based makers, the sources indicated.

Wage hikes will result in gross margin decreases of 1-5 percentage points, the sources added.