[News] Tech Firms Shift Operations, Adopting ‘Anything But China’ (ABC) Strategy Amid U.S.-China Strains

According to a report from Central News Agency, citing Wall Street Journal, following the earlier “China+1” strategy, which aimed to diversify manufacturing bases outside of China to mitigate risks, an increasing number of Western tech companies are now prioritizing an “Anything But China” (ABC) strategy as U.S.-China tensions escalate.

As a result, companies are accelerating the relocation of production lines from China. As noted by the report, this shift is especially pronounced in the semiconductor industry, which has been a focal point of U.S.-China tensions.

The report underscores that, based on findings from S&P, while past relocations primarily involved product assembly operations, the current shift extends to the manufacturing of key components, such as sensors, printed circuit boards (PCBs), and power electronics. This transformation is solidifying the shift away from China as a lasting change in the global supply chain, as the report notes.

Citing the annual survey by the American Chamber of Commerce in China, the report indicates that among more than 360 surveyed companies, 30% stated they are either considering or have already initiated the relocation of their manufacturing operations to other countries. Furthermore, the report highlights that approximately a quarter of surveyed technology and R&D firms have already started moving their supply chains out of China.

Southeast Asia and Latin America Benefit from Supply Chain Relocation

As noted in the report, this shift has created new opportunities for countries in Asia and Latin America within the global supply chain. In particular, foreign direct investment (FDI) in Southeast Asia reached USD 230 billion in 2023, a significant increase from USD155 billion in 2018, as the report notes, citing data from the Association of Southeast Asian Nations.

Numerous tech companies exiting China have opted to relocate their operations to Malaysia, as indicated by the report. According to Reuters, Malaysia has secured multi-billion-dollar investments from top companies in recent years, including Intel and Infineon. On a similar note, Micron breaks ground on a new HBM packaging facility in Singapore on January 8. With an estimated investment of USD 7 billion, as noted by its press release.

The report from Wall Street Journal also highlights that Advanced Energy Industries, a U.S. company specializing in power systems for semiconductor production and other components, announced in January its decision to shut down its third and final factory in China by July. CEO Stephen Kelley stated that over the past two years, the company has been relocating its production lines from China to the Philippines and Mexico, as customers prefer their products to be made outside China.

Consumer Electronics Sector Also Experiences Supply Chain Shift Away From China

As highlighted in the report, the smartphone and laptop sectors are also witnessing a production shift away from China.

As of 2023, nearly all laptops worldwide were still produced in China. However, according to TrendForce, China’s share of global laptop production is expected to decline to 80% this year, while Vietnam and Thailand continue to increase their laptop manufacturing output. Notably, Thailand’s laptop exports have surged nearly eight-fold over the past four years.

Chinese Companies Also Moving Operations Overseas

Moreover, the report points out that as foreign firms move production out of China, many Chinese companies are also shifting operations abroad. These companies are setting up subsidiaries and factories outside of China at the request of Western clients to mitigate potential risks associated with U.S.-China tensions.

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