PC Vendors Accelerate Moving Manufacturing Out Of China
One of the tremendous current concerns most PC vendors have about manufacturing their products in China is the potential of China enacting more restrictive policies that could dramatically impact their businesses.
Around 2015, during a trip to China, I heard of a new policy being formulated that would put tighter controls over foreign manufacturing. These were things like potentially nationalizing all foreign manufacturing plants, too demanding to own as much as 70% of a foreign manufacturing operation.
While this draconian scenario has not happened yet, these scenarios caused many PC companies to think twice about continuing to make their products in China. By 2017, this rhetoric from China calmed down, and PC makers continued to manufacture most of their PCs inside China. At that time, China still had a low-cost labor force, and its investment with its Taiwan-based manufacturers was impossible to walk away from completely.
However, by 2019 the drumbeat of more restrictive manufacturing policies towards outside companies that made PCs and other tech products in China resurfaced. This time I saw many PC companies start moving some of their China manufacturing to other Asian countries like Viet Nam, Malaysia, Thailand, Indonesia, and India.
Today, given the uncertainty of China’s policies which could be quite restrictive in the future, tech leaders around the world will be tuned into China’s 20th National Congress beginning on October 16, 2022, to watch what new rules and communist party declarations will be made during the event.
According to CNBC– “It’s the most important political event of the decade in China,” Citi analysts wrote in a note last week.
“The Congress is set to launch a new political economy cycle,” the Citi report said. “In the near term, it may help reduce policy uncertainty and allow Beijing to refocus on economic development.”
The national congress is held every five years and is primarily a political event to determine the next group of leaders for the ruling party.”
During this congress, we will see how much more power Chinese President Xi Jinping will be given. He is a champion of enacting tighter rules around foreign manufacturers. One of the more restrictive policies we have heard is that, eventually, China wants more control over what is made, and more importantly, country officials could demand that anything made in China be made only for domestic use.
There will also be great interest to see how Chinese leadership will deal with their current economic downturn, which has accelerated due to Covid lockdowns and losses in all types of manufacturing jobs.
While most PC vendors make some of their products outside of China, Apple, via their relationship with Foxconn, produces most of its products in China-based factories.
Apple, along with all PC and tech vendors, is anticipating more Chinese governmental rule changes on making products in China for exporting. It is moving fast to shift more of its manufacturing out of China.
According to Bloomberg, “Apple Inc. began making its new iPhone 14 in India sooner than anticipated, after a surprisingly smooth production rollout that slashed the lag between Chinese and Indian output from months to mere weeks.
The US tech giant made the announcement on Monday, weeks after the marquee device’s Sept. 7 unveiling. It had worked with Foxconn Technology Group, its most important production partner, with the original goal of assembling iPhones in Chennai about two months after global launch, Bloomberg News reported in August.
“We’re excited to be manufacturing iPhone 14 in India,” Apple said in an emailed statement Monday without discussing production timelines. A Foxconn representative declined to comment.”
Apple’s move to India has been in the works for at least a decade, but it appears that Apple is moving much faster to shift some of its iPhone manufacturing to India at an accelerated pace.
China’s upcoming 20th National Congress should give all PC and tech manufacturers a clearer picture of any potential they may still have for making any of their products in China in the near term. But it is clear now that the option of manufacturing tech products in China is becoming much more unrealistic. Over time China is expected to move back to a stricter protective country-focused economy, making it much more difficult for all makers of tech products to keep producing any products in China.