China’s rise and fall as the “factory for the world” is a complex story, writes Chng Boon Huei in EPS News. The country’s initial success was due to its abundant cheap labor, supported by government policy and investment. However, in recent years, China has become more expensive, and its manufacturing sector has been disrupted by the trade war with the United States, the COVID-19 pandemic, and global supply chain shortages.
As a result, many global brands are now shifting towards a “China plus one” strategy, says Huei, diversifying their manufacturing operations to other countries in Asia. Southeast Asia is a popular region for this, due to its proximity to China, its low labour costs, and its relatively stable political environment.
Some of the most popular “China plus one” destinations in Southeast Asia include Malaysia, Indonesia, Thailand, the Philippines, and Vietnam. These countries have a long history of manufacturing and offer a number of advantages over China, including lower labour costs, more stable political environments, and proximity to China’s supply chain.
Recently it was reported the U.S. State Department is partnering with the Government of Vietnam to explore opportunities to grow and diversify the global semiconductor ecosystem under the International Technology Security and Innovation (ITSI) Fund. Vietnam shows promise as a partner in ensuring the semiconductor supply chain is diverse and resilient, says the State Department.
The future of manufacturing in Asia is bright. The Asian Tiger Cubs are well-positioned to take a leading role in global manufacturing, as they offer companies the perfect combination of cost, quality, and resilience.
This trend is already being reflected in foreign direct investment (FDI) data. According to S&P Global, FDI in Southeast Asia is increasing, with notable investments in chip-testing and packaging in Malaysia, electric vehicles in Indonesia, and consumer electronics in Vietnam.
The Asian Tiger Cubs are not new to manufacturing. They have been quietly manufacturing for the world’s largest brands for decades. They have the experience, skills, and capacity to meet the needs of global companies, and they offer a more secure and diverse alternative to China.
The rise of the Asian Tiger Cubs is a positive development for the global economy. It will make supply chains more resilient and reduce reliance on China. It will also create new opportunities for economic growth and development in Southeast Asia.
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