OEMs Diversification Plan from China Intensifies; Eyes New Markets in SE Asia: Report

China remained the largest manufacturing hub for power equipment suppliers worldwide. However, coronavirus pandemic has posed a threat to its ambitions to continue to remain as global hotspot for manufacturing, because companies are now evaluating the efficiency and responsiveness of their supply chains to deal with the challenges arisen from the virus outbreak.

Thus, diversification plan of suppliers from China has intensified as dependence on Chinese manufacturers has increased the vulnerability of global companies.

A data and analytics firm predicted that, this supply-chain diversification might create opportunities for global power utilities and original equipment manufacturers (OEMs) to tap newer markets in Southeast (SE) Asia.

Commenting on the development, Somik Das, Senior Power Analyst at GlobalData, said “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.”

He further said, “this creates a tremendous opportunity for countries such as Thailand, Malaysia, Vietnam, Taiwan, and India.”

The Chinese supremacy as a manufacturing hub was driven by the launch of its 10-year ‘Made in China 2025’ plan 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.

Significantly, power equipment is one of the ten key prioritized industries in the plan along with robotics, new energy, transport, and hi-tech medical devices.

Now, companies will 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.

So, in this SE Asian region, countries like Singapore, Hong Kong, Taiwan, Thailand, India, Vietnam and the Philippines have the highest ease of doing business scores as of 2020.

Hence, these countries might attract such companies which are looking for shifting. However, every country has a different propensity to attract different business sectors.

“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. The shift of a certain pie of manufacturing opportunity from towards these countries is inevitable,” Das added.