The sector had slowed as companies faced increased costs for relocating production lines from China back to Taiwan or Southeast Asia.

Digitimes reports that networking device suppliers, including Accton Technology, Wistron NeWeb, Arcadyan Technology, Sercomm and Gentek Technology, all have been implementing the capacity relocations since 2018 to sidestep the double impacts of rising material costs and the escalating US-China trade dispute.

Accton, which previously had 35 percent of its capacity support shipments from China to the US, has spent $63.6 million expanding its capacity in Taiwan, aiming at increasing its production lines to eight from three previously.

The added capacity is expected to come online in the second quarter and will result in a 1.7-fold increase in its total production value, said the sources, adding that the initial expansion in Taiwan will be sufficient to cover the 35 percent  capacity support originally from China, with the total capacity to be further expanded in 2020.

Sercomm company president James Wang said his outfit had been ramping up its capacity in Taiwan and other areas outside China. The combined capacity from these areas will reach 40 percent of its output in the second quarter, as the ratio of China's capacity will be lowered to 60 percent.

Wistron NeWeb is expanding the production lines at its existing plant in Hsinchu and will build a new plant in Tainan Science Park. It has also rented a factory in Vietnam to ramp up its output further.

With some new production lines to come online starting the second quarter, the company's gross margin will return to stable levels in the third quarter along with the increasing capacity, Wistron NeWeb said, adding that the added capacity will meet its needs for the next two to three years.

Gemtek and Arcadyan have also built new capacities in Vietnam. Gemtek said it has kicked off small volume production at its plant in Vietnam with plans to roll out new products from the third quarter.

Server maker Inventec has already moved four of its SMT lines in China back to Taiwan, which accounts for 20-25 percent of its server production capacity. Inventec Appliance, a subsidiary of Inventec, is planning to relocate some of its production lines from China to Malaysia and Taiwan.

Wiwynn is currently shipping up to 98 percent of server products, including those to the US, from its plant in Mexico, and therefore, the company is nearly immune to rising tariffs on Chinese imports to the US market. The firm's net earnings for the first quarter of 2019 grew 13.7 percent on year NT$1.194 billion.