Taiwan-based Pegatron, the world's second-largest contract manufacturer of electronics, plans to have new factories up and running in Indonesia and Vietnam by the end of this year.

Illustrative photo.

The move is aimed at moving production away from the company's main plants in China, where operating costs have risen due to higher labor costs and the US-China trade war, Tung Tzu-hsien, Pegatron's chairman, told Nikkei in an interview.

The company is among a growing number of Taiwanese manufacturers diversifying production away from China.

Pegatron makes a wide range of devices, including Apple iPhones, under contract. It is second only to fellow Taiwanese company Hon Hai Precision Industry, also known as Foxconn.

Tung told Nikkei that China "has not been an optimum manufacturing location since more than five years ago."

The Indonesian and Vietnamese plants will make devices for internet connectivity, Tung said, adding the latter will be in the north of Vietnam.

Along with plans to expand domestic production lines in response to Taiwanese leader Tsai Ing-wen's policy of promoting local manufacturing, Pegatron aims to diversify its production, which is heavily concentrated in China.

Pegatron joins Apple’s two other iPhone assemblers -- Wistron Corp. and Hon Hai Precision Industry Co. -- in developing manufacturing facilities or building extra capacity in Vietnam. None of the three are making iPhones in Vietnam and have no imminent plans to do so. The only Apple device Pegatron makes is iPhones. GoerTek Inc. is now making AirPods in the country, while two other Apple assembly partners, Compal Electronics Inc. and Luxshare Precision Industry Co., also have a presence in Vietnam.