June 27, 2020 by Lianne Frith
Calls to boycott China have been sounding out for some time. Now, with COVID-19 adding to the list of reasons to reconsider manufacturing there, the campaign is again rife on social media.
The coronavirus outbreak has undoubtedly highlighted the madness of our industries, staking everything on one country.
However, while there has been pressure to shift production from China for a while, the reality is far from simple. China is deeply integrated into global manufacturing and impacts almost every aspect of our lives. From the electricity we consume to the electrical gadgets we depend on, to the machinery used to produce our food.
The question is how a boycott actually works, is it feasible, and how will it impact the electronics industry in the long run?
Topics such as 'Boycott China' and 'Go China' have been trending on Twitter in a bid to encourage individuals and companies alike to stop manufacturing, trading, and purchasing from China. The movement has a number of instigators, among the most notable being:
border disputes have been escalating as China has been increasingly aggressive. Ceasing the purchase of Chinese goods could work to punish the country for the expansion on its border and cut funds for China's military.
U.S. and China have imposed tariffs on hundreds of billions of dollars worth of each other's goods due to accusations of unfair trading practices and intellectual property theft.
Leading technology company Huawei has been accused of using equipment to observe transmitted data, having the ability to manipulate data or cause equipment failure, and having a special relationship with the Chinese government.
China has been one of the worst-performing markets of all the big coronavirus-infected nations after halting its economy severely impacted supply chains.
On top of the reasons driving the movement, there are economic drivers too. China is no longer a low wage, low regulation emerging economy. Labour costs have been steadily rising, and the country's supply of unskilled factory labourers has already dried up.
Previously, when there was an occasional economic hiccup, the cost would be managed. However, today it is something altogether different. With stricter environmental regulations, trade wars, and the recent coronavirus pandemic, it is becoming clear that companies need to diversify and reduce their reliance on China.
Workers at a technology factory in Zhuhai, China.
The clear advantage of moving manufacturing operations away from China is to diversify risk. For a long time now, many manufacturers have had all their eggs in one basket. That opens them up to problems when it comes to situations as we have just experienced with the economic shutdown of a country amid a global pandemic.
However, while moving finished goods from China is feasible for companies with well-developed product and assembly processes, moving the manufacturing of components made in China is a different story.
These components require entire ecosystems that aren't so easily shifted. Component manufacturing is deeply entrenched in China with complex supply chains. So, while it will benefit the industry to diversify, a complete overnight boycott would be extremely detrimental.
The 'Boycott China' campaign is yet to have a notable impact on the industry. While consumers are being urged to purchase their products elsewhere, there is a pent up demand for phones and other electronics due to home-working amid the coronavirus pandemic.
However, as they receive more messages through social media, there is a distinct chance that it will start to influence purchase decisions. Meanwhile, if our governments buckle under the pressure to boycott Chinese products, consumers will feel the pinch in the rising costs of everything from phones to cars.
Trade and the virus will undoubtedly make the world of engineering very different in the next decade, but it isn't going to be a sudden change. What's more, it's unlikely that China will be willing to give up its place as the world's electronics workshop without a fight.
The country is well aware that its network of suppliers, competent workers, and distributions systems can't be easily replicated. Any large-scale relocation of manufacturing would take time, so engineers and the companies they work for should have time to adjust.
Image of the back of an iPhone showing that it was assembled in China.
The experience of dealing with the coronavirus pandemic has raised questions about the globalised business model of modern corporations. With this in mind, China's move away is gaining some traction, especially among smaller-scale manufacturers. However, there are also big companies making small moves away from China:
While the company isn't looking at making any quick moves out of China, it is reviewing adjusting some areas of the supply chain and moving hardware production. A trial in Vietnam is reportedly due to start later this year.
The company ended mobile phone production in China in September 2019 due to rising labour costs.
With hardware mainly produced in China up until now, Microsoft has been accelerating its efforts to shift production to other parts of Asia.
The company has asked a manufacturing partner in Thailand to prepare production lines for its smart home products.
It would seem like China's time as the world's leading electronics manufacturer will slowly come to an end. However, picking a new country or country to take the helm is the challenge our manufacturers will face.
Nearby countries such as Vietnam, Thailand, Cambodia, and Indonesia have begun to up their game. The countries have started to invest in transport infrastructure and have developed substantial economic zones. Meanwhile, while a considerable part of India's supply chain has roots in China, it is working on building self-dependency.
When it comes to products, consumers will be king. They have the purchasing power to boycott China to some extent. However, it's not easy to identify where every component has been sourced. While people may decide not to give money to Chinese-manufactured brands, they could find that the electricity they use to power their house is still imported by machinery imported from China.
Ultimately, Chinese manufacturing is well entrenched in our lives, and that isn't likely to change anytime soon. However, what won't do any harm, engineers or consumers, is more competition and diversification.
