Concerns about tech security and COVID-19-related disruptions are propelling companies to move more production away from China, National Development Council (NDC) Minister Kung Ming-hsin (龔明鑫) said.
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,” Kung said in an interview last month, adding that the trend is accelerating.
“When the US first hit China with stiff tariffs, companies were still a bit hesitant about whether they needed to diversify their supply chains, but following COVID, they realized it is now necessary to shift their production elsewhere,” he said.
Photo: Chen Yi-ling, Taipei Times
China’s stringent COVID-19 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’ protests turned violent at assembly partner Hon Hai Precision Industry Co’s (鴻海精密) iPhone complex in Zhengzhou late last year.
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.
Concerns over tech security are also spurring companies and policymakers, Kung said.
More Taiwanese semiconductor companies might 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 said.
Even Chinese firms 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,” Kung said. “Chinese companies need to do so too.”
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