Tech companies shifting operations away from China . . .
According to Goldman Sachs, leading tech companies are shifting their manufacturing facilities from China to Vietnam and India. During the first five months of 2019, Vietnam’s direct investment from China jumped by 4.6 times to US$1.56 billion. In India, FDI inflow from China in 2018 grew 137 per cent over the previous year, exceeding US$391 million. While cheap labour and land costs are the main drivers of these shifts, the threat of tariffs has served as a catalyst.
Apple also considering relocation . . .
Apple has also asked its key assemblers to assess the costs of moving 15 to 30 per cent of its operations away from China. According to the Nikkei Asian Review, the countries being considered for this move are India, Indonesia, Malaysia, Mexico, and Vietnam. Once again, U.S. tariffs on China are a key driver.
Not so fast . . .
Although Vietnam has reportedly been one of the biggest beneficiaries of the trade war, there are limits to its ability to replace China as the world’s manufacturing hub. Vietnam’s infrastructure is far less developed than China’s, its population of available migrant workers is comparatively small, and its workers’ skills are not on par with those of Chinese workers. It is feasible to transfer the manufacturing of smart phones and PC products to Vietnam, but high-end products such as semiconductors are likely to remain in China.
- Reuters: Apple considers moving 15 to 30% of production capacity from China: Nikkei
- South China Morning Post: Vietnam and India see explosion in direct investment from China as tech suppliers shift production overseas, says Goldman Sachs
- South China Morning Post: Vietnam biggest winner from first year of US-China trade war as supply chains shift, report shows