Diversification of power equipment suppliers from China intensifies as supply chains plan to tap new markets in Southeast Asia
The plan of diversification of suppliers from China has intensified as dependence on the Chinese manufacturers has increased the vulnerability of global companies
China is the largest manufacturing hub for power equipment in the world. With COVID-19 has posing a threat to China’s ambitions to remain as global hotspot for manufacturing, companies are evaluating the efficiency and responsiveness of their supply chains to deal with the challenges arisen from COVID-19 outbreak.
The plan of diversification of suppliers from China has intensified as dependence on the Chinese manufacturers has increased the vulnerability of global companies.
This supply-chain diversification might create opportunities for global power utilities and original equipment manufacturers (OEMs) to tap new markets in Southeast Asia, says GlobalData, a leading data and analytics company.
The global equipment exports by China was US$137bn in 2017.The Chinese supremacy as a manufacturing hub was driven by the launch of a ten-year plan ‘Made in China 2025’ with a vision to lead the high-tech manufacturing sectors globally.
The policy aims to use government subsidies, provide stimulus to government-own entities, and search for intellectual property (IP) acquisition. Power equipment is one of the 10 key prioritized industries in the plan along with robotics, new energy, transport, and hi-tech medical devices.
Somik Das, Senior Power Analyst at GlobalData, comments: “The outbreak of COVID-19 stressed the need for diversification of supply and reduce reliance on one country. Post the pandemic, several US and EU firms, having their manufacturing facilities in China, want to relocate production activities to other countries in the same region. This creates tremendous opportunity for countries such as Thailand, Malaysia, Vietnam, Taiwan, and India.”
As companies evaluate supply chain feasibility with other nations of Southeast Asia, they must identify not only the risk posed by pandemics but also the overall ease of doing business. In the Southeast Asian region, Singapore, Hong Kong, Taiwan, Thailand, India, Vietnam and the Philippines have the highest ease of doing business scores in 2020. Hence, these would be the countries the companies would be looking at as each of these countries has a different propensity to attract different business sectors.
Das concludes: “Malaysia has the potential to attract semi-conductor businesses, Thailand to attract automotive businesses, and India would likely attract heavy electrical machinery and power electronics. Shift of a certain pie of manufacturing opportunity from towards these countries is inevitable.”