Who is Benefitting from China Supply Chain Problems?

As China shuts down factories and the China supply chain falters, demand has not disappeared for western and domestic manufacturing needs. Some companies have been turning to ASEAN countries for manufacturing. 

ASEAN (the Association of Southeast Asian Nations) is a union of ten member Southeast Asian states. Indonesia, Thailand, and Vietnam have benefitted from China’s supply chain problems. 

Wind Information reports that Vietnam exports increased by 19.1% in March 2022, compared to March 2021. By April, the figure was 30.4%. Vietnam is a key industrial node in the supply chain for consumer electronics, long a Chinese specialty.

Apple owns the world’s largest assembly factory in China, but ongoing Chinese lockdown restrictions and attendant manufacturing disruptions mean they are considering a location in Vietnam for their next manufacturing hub.

Pre-2020, there was already a trend for western companies to source from ASEAN countries. Inevitably Covid has accelerated the trend.

At the moment, the ASEAN countries can’t match Chinese manufacturing capabilities, but they are cheaper than China; the pricing disparity has inevitably grown during Covid.

China’s supply chain problems began before Covid, during Donald Trump’s US presidency when the US imposed tariffs on Chinese imports. In contrast, ASEAN countries have few tariff restrictions.

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