Skyline, Ho Chi Minh City, Vietnam
John Harper | Photodisc | Getty Images
“Geopolitical [tensions have] We have accelerated these activities which began during the COVID-19 lockdown,” Lim added.
The “China Plus One” strategy is By maintaining a base in China but diversifying their manufacturing operations to other countries, companies are reducing the risks associated with total reliance on the Chinese market and supply chain.
This has led to further investment growth in ASEAN countries. Foreign direct investment in the ASEAN countries of Indonesia, Malaysia, the Philippines, Thailand, Singapore and Vietnam is set to increase from an annual average of $190 billion from 2020 to 2022 to $236 billion in 2023. OCBC economists said in a May report..
The main sources of inflows were the United States, Japan, the European Union, mainland China, and Hong Kong.
“The ASEAN-6 region is benefiting from the diversification of global and regional supply chains and the adoption of the ‘China Plus 1’ strategy. FDI inflows into the region from mainland China and the Hong Kong SAR have increased, with the majority of this going to manufacturing and certain services sectors,” the OCBC economists said.
Vietnam has become a key manufacturing base for US tech giant Apple as the company seeks to diversify its product assembly outside China.
Beijing’s strict coronavirus prevention measures and worker unrest at Foxconn’s flagship iPhone factory have caused major disruptions to production.
MacBook, iPad, Apple Watch Reportedly It is manufactured in Vietnam.
“Vietnam’s proximity to China has long made it a preferred destination for the supply chain to offshoring processes that can significantly reduce production costs,” said Yinglan Tan, founding managing partner at Insignia Ventures Partners.
Vietnam is already a major research and development center for Samsung, as well as a manufacturing and export base for Samsung smartphones. Local Report.
“Vietnam has additional advantages: competitive labor costs, market access and a number of free trade agreements that make it much easier to export to other markets, for example the EU,” Kai Wei Anh, ASEAN economist at Bank of America Securities, told CNBC’s “Squawk Box Asia” earlier this month.
In Malaysia, semiconductor companies including Intel, Globalfoundries and Infineon have set up or expanded operations in the country in recent years amid the ongoing U.S.-China conflict.
“Malaysia is seeing a revival of its long-standing semiconductor industry, attracting new investment from companies such as Intel,” said Monks Hill Ventures’ Lim.
Industry observers say Malaysia’s strengths have always been its skilled workforce in packaging, assembling and testing chips, and relatively low operating costs.
“Semiconductors are not the only sector booming in Malaysia. Investment in data centres has increased significantly, particularly in recent months, and there will also be other sectors such as solar power generation and EV-related components. Malaysia is attracting a wide range of investment into the country,” said Ang of BofA Securities.
The archipelago is rich in copper, nickel, cobalt and bauxite, which are essential for making electric vehicle batteries.
“Indonesia is also an interesting country as they hope to emerge as an integrated EV hub,” Ang said. “It may still be very early days, but we are looking to expand capacity across the supply chain.”
The Indonesian government is offering incentives to EV companies to set up manufacturing bases locally.
“China Plus 1 is not just about foreign companies operating in China. Geopolitical and international trade developments are also forcing Chinese manufacturers to geographically diversify their production,” said Anders C. Johansson, director of the Stockholm Institute for China Economic Research at the Stockholm School of Economics. LinkedIn Post last week.
The Ministry of Industry announced earlier this month that it had signed agreements with four Chinese companies: Neta, Wuling, Chery and Xiaokang. Establish Indonesia as an EV production base.
Chinese electric vehicle maker BYD Commercial production of EVs begins in Indonesia According to local reports, it will be in 2026.
Singapore has become a “destination of choice” for companies looking to set up their regional headquarters or expand across the region. Report from ASEAN Briefing.
“Today, this diversification is not just seen among global corporations like Apple and their supply chains, but also among entrepreneurs and startups looking to build global businesses in the Asia-Pacific region,” said Insignia Ventures Partners’ Tan.
“Singapore in particular has become a destination for these entrepreneurs to base their global businesses, while still being able to raise capital from the US, for example, and employ engineers in China,” Tan added.
Including Chinese companies Tick tock and Shane The company established its regional headquarters in Singapore, which it sees as a stable base amid geopolitical headwinds.
“Singapore’s status as a trusted hub for financial and regulatory infrastructure will continue to attract companies seeking an Asian base in these uncertain times,” said Monks Hill Ventures’ Lim.