China's COVID policies are forcing companies to leave the country.
They were already moving out due to tensions and tariffs.
The world's factory is being replaced by India, Vietnam, Thailand, Malaysia, andBangladesh.
For the last four decades, China has been the factory of the world. This status was brought to a screeching halt by the Pandemic.
The rise of China as the world's factory spanned over four decades and ushered in an era of globalization.
The facade began to fall after Donald Trump launched a trade war against China. This has caused investors to rethink their risks.
The importance of not relying on one country for manufacturing needs was driven home by the fact that some investors moved parts of their manufacturing facilities out of China.
Ashutosh Sharma, a research director at market research firm Forrester, told Insider in December that the extra fuel to the fire came from COVID.
The trade war continues to have an effect. In October, President Joe Biden imposed export controls on shipping equipment to Chinese-owned factories that make advanced logic chips. This made the relationship worse.
Multinationals are looking to hedge their business risks to navigate this complicated web of US- China trade tensions.
China is moving its supply chains to other countries.
Apple and chipmakers are looking at India's vast lands and young population as they try to beat China in manufacturing high-end products.
India is a great alternative to China because of it's vast lands and young population.
The UN's Department of Economic and Social Affairs said in a July report that India will become the world's most populous country in 2023.
Apple is exploring moving its iPad manufacturing to the South Asian nation of India, as well as moving some of its iPhone production there. In a September note, analysts at JP Morgan said they expected Apple to move 5% of its iPhone 14 to India by the end of the century. They think that one in four phones will be made in India by the year 25.
India has a large labor pool and a long history of manufacturing. The CEO of supply chain risk management platform Everstream told Insider that many are looking at Indian manufacturing as an alternative to China.
The move is more difficult than thought.
In the last fiscal year, India's Prime Minister Modi sent a record amount of foreign direct investments to the country.
Even though the Indian government is increasing its appeal to foreign investments, it's still hard to do business in the country because of bureaucracy, red tape, and multiple stakeholders that prolong decision-making.
Vietnam has undergone rapid economic reforms in the past 25 years.
Since 1986, Vietnam has undergone rapid economic reforms.
The reforms have resulted in Vietnam being one of the world's least developed nations to a middle-income economy in one generation.
According to the country's Ministry of Planning and Investment, Vietnam attracted over $31.15 billion in foreign direct investment pledges over the course of the next two years. The majority of the investments went to the manufacturing andprocessing sector.
The manufacturing of apparel, footwear, and electronics is one of Vietnam's main strengths.
Apple is moving some manufacturing of its products to Vietnam and is also planning to move some of its MacBook production to Southeast Asia.
Some of the production lines from China have been moved to Vietnam.
Thailand's foreign direct investment rose threefold between 2020 and 2021.
Thailand is moving up the value chain in manufacturing and is a production hub for car parts, vehicles and electronics, with Multinationals such as Sony and Sharp setting up shop here.
Sony said it was closing its Beijing plant and moving some production to Thailand to save money. Sharp moved some of its printer production to Thailand due to the trade war between the US and China.
International firms aren't the only ones. Firms from China have moved parts of their supply chain to Thailand. According to the South China Morning Post, JinkoSolar is moving their production to Southeast Asia to take advantage of lower costs and avoid political tensions.
ZhuangYan, the president of Canadian Solar, said at an industry event in July that setting up manufacturing plants abroad didn't come from the pursuit of opportunities.
Thailand's Board of Investment said in February this year that foreign direct investments had increased threefold.
Bangladesh is currently a beneficiary of the supply chain shift. It wants more of the pie.
Bangladesh has been a rising star in the garment manufacturing sector.
The rise of Bangladesh was caused by rising labor costs in China.
Mostafiz Uddin, the owner of a Bangladeshi apparel manufacturer, told Insider that the average monthly salary of a worker in Bangladesh is less than one-fifth that of a factory worker in Guangzhou.
Uddin said that rising material costs is pushing apparel companies to look for alternative destinations such as Bangladesh.
The garment manufacturing industry is a key pillar of Bangladesh's economy, accounting for 85% of shipments or over $42 billion of the country's exports in 2021. After China, the country is the second largest garments exporter.
Bangladesh is trying to get more investments into other sectors including pharmaceuticals and agriculture processing.
Companies moving away from China have been eyed by Malaysia for a long time.
The manufacturing shift out of China has led to opportunities for Malaysia.
According to the Malaysian Investment Development Authority, it has attracted at least 32 projects which have relocated from China to Malaysia. The authority didn't give any information about the companies that moved.
Lower labor costs and trade tensions between the US and China have led to a rise in tech investments into Malaysia. Over the last few years, major deals include a 1.5 billion Malaysian ringgit, or $339 million, investment by US chip giant Micron. Jabil is a US company that makes iPhone covers.
Many people have expressed their intention to shift from China to another country. The CEO of the Malaysian Investment Development Authority said in 2020 that the only thing was timing.
Manufacturing the electronics and vehicles was the main contributor to Malaysia's five-year high in foreign direct investment in 2011.
Business Insider has an article on it.
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