As per the report from The Wall Street Journal, an increasing number of western technology companies are adopting the “Anything But China” (ABC) strategy, accelerating the shift of supply chains away from China.
With the escalating tensions in US-China trade, companies are no longer satisfied with the “China Plus 1” strategy and are actively moving their production lines on a large scale.
“All companies are looking for alternatives to China,” said Wong Siew Hai, Chairman of the Semiconductor Industry Association of Malaysia. Enterprises have shifted from a “just-in-time” approach to a “just in case” strategy.
The strict COVID-19 lockdown policies imposed by the Chinese Communist Party have disrupted supply chains for industries such as iPhone manufacturing and automobiles, prompting a significant number of western companies to exit China and turn to countries like Vietnam and India.
Subsequently, the US imposed export controls on China’s semiconductor industry, accelerating this transition. Technology industry executives had anticipated that a return of Donald Trump to the White House would further drive the de-Chinafication of corporate supply chains. The new Trump administration has recently imposed a 10% tariff on all Chinese imports and plans for further increases.
Unlike past moves that only involved relocating assembly processes, a report by S&P indicates that the current supply chain shift involves critical components such as sensors, printed circuit boards (PCBs), and power electronic equipment, requiring substantial upfront investments that make the trend of exiting China more long-lasting.
The US export controls on China’s semiconductor industry, limiting access to advanced chips and equipment, have hastened the shift of supply chains. Following the US prohibition of exporting artificial intelligence (AI) chips to China in 2022, production of AI servers has gradually shifted to Mexico and Malaysia.
The US CHIPS and Science Act stipulates that enterprises receiving US subsidies cannot expand production capacity in China within 10 years. Companies like Applied Materials, Lam Research, and Advanced Energy Industries are cutting ties with Chinese suppliers, with plans to shutter factories in China and move operations to the Philippines and Mexico.
Vietnam is actively seeking to attract investment in the semiconductor industry, offering tax incentives. Nvidia has established a research center in Vietnam, while Marvell Technology has expanded its local engineering team and downsized its China research team.
From smartphones to laptops, electronic product supply chains are relocating overseas. A survey by the American Chamber of Commerce in China shows that 30% of surveyed companies plan to shift production bases, with a quarter of tech companies already starting to move away from China.
In 2023, Southeast Asia attracted $230 billion in foreign investment, a 48% increase from 2018. Companies like Intel, Micron Technology have invested heavily in Malaysia and Singapore. HP has set up a laptop production line in Thailand, while Penang, Malaysia, produces cutting-edge AI servers.
China accounts for nearly 100% of global laptop production, but TrendForce predicts that by 2024, this share will drop to 80%, with Vietnam and Thailand rapidly boosting their production capacities. Thai laptop exports have increased nearly eightfold in four years.
Amid the deteriorating US-China relations, many Chinese companies are also establishing overseas factories due to demands from western customers. For instance, Eoptolink Technology has expanded its operations in Thailand under western clients’ requests.
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