New Data Shows U.S. Companies Are Definitely Leaving China

Global manufacturing consulting firm Kearney released its seventh annual Reshoring Index on Tuesday, showing what it called a “dramatic reversal” of a five-year trend as domestic U.S. manufacturing in 2019 commanded a significantly greater share versus 14 Asian exporters tracked in the study. Manufacturing imports from China were the hardest hit.

Last year saw companies actively rethinking their supply chain, either convincing their Chinese partners to relocate to southeast Asia to avoid tariffs, or by opting out of sourcing from China altogether.

"Three decades ago, U.S. producers began manufacturing and sourcing in China for one reason: costs. The trade war brought a second dimension more fully into the equation―risk―as tariffs and the threat of disrupted China imports prompted companies to weigh surety of supply more fully alongside costs. COVID-19 brings a third dimension more fully into the mix­, and arguably to the fore: resilience―the ability to foresee and adapt to unforeseen systemic shocks," says Patrick Van den Bossche, Kearney partner and co-author of the 19-page report.

The main beneficiaries of this are the smaller southeast Asian nations, led by Vietnam. And thanks to the passing of the U.S. Mexico Canada Agreement, Mexico, for all its problems with drug cartels, has become a favorite spot for sourcing.

Japan to Fund Firms to Shift Production Out of China

Japan has earmarked $2.2 billion of its record economic stimulus package to help its manufacturers shift production out of China as the coronavirus disrupts supply chains between the major trading partners.

The extra budget, compiled to try to offset the devastating effects of the pandemic, includes 220 billion yen ($2 billion) for companies shifting production back to Japan and 23.5 billion yen for those seeking to move production to other countries, according to details of the plan posted online.

China is Japan’s biggest trading partner under normal circumstances, but imports from China slumped by almost half in February as the disease shuttered factories, in turn starving Japanese manufacturers of necessary components.

That has renewed talk of Japanese firms reducing their reliance on China as a manufacturing base. The government’s panel on future investment last month discussed the need for manufacturing of high-added value products to be shifted back to Japan, and for production of other goods to be diversified across
Southeast Asia.

Samsung ends mobile phone production in China

SEOUL (Reuters) - Samsung Electronics Co Ltd (005930.KS) has ended mobile telephone production in China, it said on Wednesday, hurt by intensifying competition from domestic rivals in the world’s biggest smartphone market.

The shutdown of Samsung’s last China phone factory comes after it cut production at the plant in the southern city of Huizhou in June and suspended another factory late last year, underscoring stiff competition in the country.

The South Korean tech giant’s ceased phone production in China follows other manufacturers shifting production from China due to rising labor costs and the economic slowdown.

Sony also said it was closing its Beijing smartphone plant and would only make smartphones in Thailand.