Updated: May 18, 2020
In the current landscape of COVID-19, rising tensions and businesse reshoring; What will happen to China's status are a global tech manufacturing powerhouse?
China leads the world not only in tech manufacturing but manufacturing itself for several years. But this giant has been walloped from the pandemic we know as COVID-19 or SARS-COV-2. Millions forced to remain at home to prevent a further spread of the virus, and many of them work in the technology manufacturing sector. Cost is the ultimate reason most tech companies choose China to manufacture their products; not only was labour cheap. They were also highly competent. China has used much of the economic gains to train its workforce resulting in the rise of many local tech companies such as Alibaba, Wechat and TikTok. But these have come at a cost, the more educated and well-trained your workforce becomes, the more expensive they become. And if the main reason most international brands like Apple and Razer chose China for production is the price, it becomes much harder to attract and maintain manufacturing on behalf of these international tech giants.
The pandemic has killed not only people but confidence in China. Countries are concluding the figures coming out of China as inaccurate and production for tech manufacturing coming to a standstill has lead to a global shortage in essential hardware such as storage and networking equipment. Weighing these factors together with the low cost, has tipped the scale against China's favour. Countries like the US and Japan are offering to cover reshoring costs for local companies who produce a significant amount of their products in China. A devastating initiative and possibly a deadlier blow to China's future economy. Diplomacy between China and the western world has collapsed. The pandemic blame game's ripple effect caused by not only the reported numbers of infection from China but also their lack of transparency. Many companies are now aggressively looking for alternative countries to move their tech manufacturing and one of the region to gain the most is most likely South America and South East Asia, where labour costs are still meagre. Rather than have all the manufacturing in one country, there is the option to diversify production to many smaller countries. Fragmenting manufacturing in such a way allows companies to quickly move their manufacturing initiatives and requirements from one country to another.
What will happen to all the highly-skilled workers in China? Once the pandemic is over, jobs may disappear from China and for good. Millions might become jobless for a moment, but there is a silver lining. Countries which brought manufacturing back to their country might fill up some of their headcount from China because they are well-trained. Workers may need to upgrade themselves in terms of language and get used to a foreign culture, a small price to pay consider the alternative. However, this leaves China behind. Does China have enough expertise to innovate and produce great tech products on their own? Will China be able to recover from the recession in the horizon of this pandemic? Will this be the end of China's reign as a global economic superpower?
China may undoubtedly struggle the most of any country in the coming years. Smaller companies which adapted the best would emerge from this pandemic, but we think this is hardly the end of the red dragon; it does seem the end of China's lead as a global tech manufacturer.
Thank you for reading 'Is this the end of China's dominance in tech manufacturing?' by IT Block. IT Block is an IT support services firm based in Singapore and a registered Google News source.