More companies are considering relocating their manufacturing currently based in China—but the task is daunting.
Key Details
- Between tariffs, COVID restrictions, and unsteady international relations, businesses are reconsidering manufacturing relationships with China.
- Moving established manufacturing facilities and reworking current supply chains is a monumental task. Apple, for example, will take an estimated eight years to move just 10% of its production out of China, Bloomberg reports.
- Smartphone production in particular is difficult to relocate as China makes up 70% of global smartphone production.
Why it’s news
Decades worth of investment has established a complex supply chain for technology manufactures in China. Moving could cause major disruption to the complicated process.
Despite the difficulty in moving, recent world events, such as the conflict between Russia and Ukraine, serve as a reminder of the dangers of placing all manufacturing in one location.
Adding to companies’ incentive to migrate, U.S. and Chinese trade relations have been tense during the last several years.
Tariffs put in place during the Trump administration, sanctions on Chinese tech manufacturers, and some direction from the Biden administration have indicated a trend against U.S. and Chinese trade.
The Chips and Science Act and the Inflation Reduction Act, two recent pieces of legislation, aim to bolster U.S. technology development, but at the same time, they push companies away from China.
To access the $52.7 billion in federal funding, companies must drastically reduce chip production in China and countries of concern, like Russia.
Private business relationships with China have suffered just as much as government relations.
China’s COVID Zero policy combined with unrest in the region has led to optimism from U.S. firms reaching an all time low. Of companies surveyed by the U.S.-China Business Council, over half have delayed or canceled plans in China.
While some companies may be moving out of China itself, many aren’t moving far. They are shifting to neighboring countries like India, Vietnam, and Indonesia. Even with these shifts, China remains the core production location.
