Concerns about tech security and pandemic-related disruptions are propelling firms to move more production away from China, according to a senior Taiwanese official.
(Bloomberg) — Concerns about tech security and pandemic-related disruptions are propelling firms to move more production away from China, according to a senior Taiwanese official.
India and Southeast Asia are the major beneficiaries as more manufacturers try to create two separate supply chains to service Chinese and non-Chinese markets — “red” and “non-red,” said Kung Ming-hsin, Minister of Taiwan’s National Development Council. That trend is accelerating, he said.
“When the US first hit China with stiff tariffs, companies were still a bit hesitant about whether they needed to diversify their supply chains,” Kung said in an interview last month. “But following Covid, they realized it is now necessary to shift their production elsewhere.”
China’s stringent Covid policy led to sudden lockdowns, logistics bottlenecks and protests that disrupted production throughout the world’s biggest manufacturing nation. The sudden and sometimes months-long production halts drove home the risks of relying on a single country for global trade, prompting companies to seek other manufacturing bases.
One accelerant was Apple Inc.’s projected output cut after workers’ demonstrations turned violent at assembly partner Foxconn Technology Group’s iPhone City complex in Zhengzhou in late 2022. Since then, the world’s most valuable company has been pushing its suppliers to bolster their manufacturing capabilities outside China, adding more iPhone production capacity in India.
Read: Apple Looks Beyond China in Bid to Remake Cook’s Supply Chains
Concerns over tech security are also spurring companies and policymakers, according to the Taiwanese minister. More Taiwanese chip companies may set up factories in India and Southeast Asia, instead of China, he said.
“India has concerns about IT security. It doesn’t want mature chips or low-end products all coming from China,” Kung added.
Even Chinese companies are seeking alternative sources of supplies to better fulfill overseas demand, he said. “It’s not just Taiwanese companies that need to divide their supply chains. Chinese companies need to do so too.”
Read: Apple Suppliers Are Racing to Exit China, AirPods Maker Says
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