China's dominating supply chain role at risk

                                                                                                                                                                                       

There is apparently signs of an ongoing trend for the global manufacturing industry chain to be shifting outside China to avoid the risk by relying on a single manufacturing base.

Due to delivery disruptions caused by the pandemic and also geopolitical tensions, global makers of consumer electronics like mobile phones and tablets, for whom China has for decades now been by far the main production country for their products, are finding alternative locations to diversify their manufacturing.

This development is naturally subject to major concern in China, and the government is urging Chinese companies to strive becoming adept in high-value-added production to stay resilient to tackle disruptions and the risk of losing its central role in global supply chains. One is determined to overcome the impact of the government three-year zero-Covid policy, which was relaxed only a few weeks ago.

One major manufacturer is planning to move up to 30% of its capacity from China to countries including India, Vietnam and Brazil.

While such move away could undermine China’s role as the world’s factory and hurt its economic competitiveness, some experts believe the process will be slow. Meanwhile, some Chinese manufacturers, drawn by favorable local policies such as tax relief, have also built factories in India and Southeast Asia.

According to recently published research, more than 1 billion smartphones were made in China last year, representing 70-80% of the global supply, while India and Vietnam made up the remaining 20 %. It is emphasized by analysts that China’s consumer electronics industry has developed for over four decades, the market is huge, and the edge is still there.

China’s domination role in the electronics supply chain is seen to be the result of multiple factors, including the country’s vast market size, favorable policies, cost efficiency, steady supply of skilled workers, and an all-round industry chain.

In the next 5-10 years Chinese companies are expected to move up the supply chain ladder to focus more on advanced manufacturing domestically, while shifting low-value production overseas.

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(Article is based on TechTrend article, edited by T.Sollie)