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China’s loss is Southeast Asia’s gain as supply chains shift away to cheaper climes
- Southeast Asian governments have been beckoning foreign firms with cheaper labour, tax breaks and improved logistics as China’s Covid woes rumble on
- But analysts say the likes of Malaysia, Thailand, Vietnam and Indonesia will long struggle to match China’s deep, integrated supply chain network
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Global manufacturers have spread their bets to Southeast Asia – with Intel chips off to Malaysia, Apple AirPods and Lego to Vietnam and Murata capacitors to Thailand – as companies inside China brace for even more Covid-induced misery on top of earlier pandemic controls and punishing US tariffs.
While China’s troubles continue, Southeast Asian governments have been beckoning businesses their way with cheaper labour, tax breaks and improved logistics.
Amid a blizzard of warnings from foreign companies that the near-total isolation of the last three years has made the cost of operating in the country too high, China has finally relented on its strict zero-Covid policy that sparked mass protests last year.
But its reopening might already be too late as complex supply chains that take several years to embed shift away from the country, or at least diversify, analysts warn.
Giants such as Apple, Samsung, HP and Dell are ploughing ahead with expensive moves for parts of their operations to factories in Southeast Asia, with an eye on the long-term.
Other smaller firms are relocating too, with footwear, apparel and toy manufacturers also increasingly looking to the Southeast Asia region, whose workers are now several times cheaper to hire than those in China.
Biman Mukherji has more than two decades of reporting and editing experience in Asia, focusing on Indian and Asia business.
Ralph Jennings joined the Political Economy desk as a Senior Reporter in August 2022 having worked as a freelancer since 2011. Ralph previously covered news for Thomson Reuters in Taipei and for local newspapers in California. He graduated from University of California, Berkeley with a bachelor’s degree in mass communication.
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