Pandemic lockdowns and worsening Chinese and U.S. relations have prompted Apple to move some of its production outside of China—but they are not the only ones.
- Over four decades, China rose to become the world’s factory, producing products for companies around the world and bringing in an era of globalization and integrated supply chains.
- However, China’s position has begun to weaken—starting in 2018 when then-President Donald Trump challenged U.S. reliance on China.
- The country’s standing received another blow during and shortly after COVID. China’s strict Zero-COVID policies meant its factories were at a standstill, and customers started to look elsewhere.
- Most companies are not moving completely outside of China but are diversifying their options to prevent a complete standstill if one manufacturing option is unavailable.
- Companies are predominantly moving to India, Vietnam, Thailand, Malaysia, and Bangladesh.
Why it’s news
China has been the world’s factory for decades. Any shift in that norm is a big change in the manufacturing world. For China, companies choosing to diversify means fewer opportunities to do business. For the countries corporations are moving to, the change of heart presents an opportunity for economic growth.
Recent surveys have revealed that Western businesses are increasingly looking elsewhere for their manufacturing needs. A European Chamber of Commerce in China poll taken last summer found that around 25% of its members that had operations in China were considering leaving. For about half of these members, politics played a role in this decision. In their view, China has become too politicized.
Director General of the Confederation of British Industry Tony Danker said in an interview earlier this year that every company he had spoken to was at least considering relocating supply chains outside of China, Forbes reports.
In 2022, around 19% of survey respondents told the American Chamber of Commerce in Shanghai that they were planning to reduce investment in China—double the amount from 2021.
Even some retailers are starting to insist that their vendors decrease reliance on China. Zipfox CEO Raine Mahdi told Plastics Today that “Walmart used to insist that any potential vendors they considered [had to] produce their goods in China. Now, they will not consider new vendors who don’t have at least one supplier outside of China.”
Here are just a few of the major companies reconsidering their relationship with China:
Several Japanese companies are also looking into alternative options.
Chinese manufacturers will not have to worry yet. Its infrastructure and reach is so extensive that this initial exodus will hardly affect its overall operations. But relations with Western governments, including the U.S., are under growing strain, which could lead to more trouble.