Pegatron, the world’s second-largest contract manufacturer of electronics,  announced plans to have new factories in Indonesia and Vietnam in operation by the end of the year.

The company’s trying to reduce its reliance on its plants in China, where operating costs have risen due to higher labor costs and the U.S.-China trade war.  Pegatron is among a growing number of Taiwanese manufacturers diversifying away from China.

Pegatron’s senior management has stated China “has not been an optimum manufacturing location since more than five years ago,” adding, “When U.S. President Donald Trump threw a stone, diversification of production began like tumbling building blocks.”

The Indonesian and Vietnamese plants will make devices for internet connectivity.

India

Smartphone makers in China and the U.S. are also looking for contract manufacturers in India, where sales remain brisk, but Pegatron has no plans to expand into the country.