Sino-US trade war no matter what kind of situation to negotiate a huge effect it has become irreversible. “Earth is flat” is experiencing never had severe doubts, centralized manufacturing division of labor brought about by globalization are also being challenged. China has become the “world factory” is the most typical sign of the times, the plant contributed nearly one-third of global manufacturing capacity. However, the manufacturing footprint drift is occurring, will inevitably color coated with a strong economy, security and national protectionism. Modular, decentralized locally made or will become a new trend of global manufacturing. Chinese industry is facing an unprecedented crisis in the manufacturing supply chain. China manufacturing shift how fast? Foxconn’s every move, is undoubtedly the most significant benchmark. Apple – Foxconn – China triangle formed by the supply chain, is to create the most shining milestone in China, has been shining in the past decade. Apple’s high-end products, made in China, has become an unshakable practice. However, just recently, Foxconn has begun full-scale production plant near Chennai, India iPhone XR, plans to increase production of iPhone 11, and the most advanced iPhone 11 Pro and iPhone 11 Pro Max is also possible. It is a symbol of an epoch-making. Just before last year, Apple’s small foundry Wistron Wistron here can only produce old products iPhone SE and iPhone 6s, have already let the local media excited. Earlier this year, Wistron has begun production of iPhone 7. Today, the number one player already in place. That, in July 2018, India’s media are still iPhone 6s production locally and cheer; and this year, the new iPhone listed 11 local production in India soon, while the iPhone 11 of the production process is much more complicated . CNBC think Vietnam can not replace China – but only part of Vietnam without a doubt, the greatest beneficiaries of trade disputes between Washington and Beijing, a Vietnamese must go. Last month, Vietnamese Prime Minister announced, with the support of strong exports and foreign investment, GDP growth in Vietnam is expected to exceed 6.8%, and foreign exchange reserves reached a record $ 7.3 billion. Vietnam’s Bureau of Statistics also a high-profile adjustment in August, the 2011 – 2017 period total GDP growth was adjusted to 25.4%, but this has not been reflected in 2018 toTo a more rapid development.
Figure 1: Comparison between China and Vietnam in the export growth during the Sino-US trade war (Source: CNBC)
According to CICC research report in September, nearly a year of investment boom rocket-like rise. 2018 Sino-US trade friction has led to centralized transfer. Chinese enterprises, Chinese enterprises bear the brunt of running at the forefront, only the first half on the floor of 426 companies, invested more than $ 2.5 billion. This also led to the original vacant factory buildings, skilled employees and sells land abnormalities, costs rose rapidly. Trade war accelerated the trend of companies to factories in China’s shift to Vietnam, partly because China’s rising labor costs, on the other hand also to reduce the risk. Undoubtedly, this time to “China as a teacher,” the neighbor, to fill the Chinese exports to the US in terms of lost market share. Various multinational companies (including China) using a skilful manner, by means of the shift of manufacture, avoidance operation is completed. So Vietnam in the end there is what kind of family property it? Vietnam is about 90 million people, per capita GDP of $ 2600, a report view of gold is that it is very close to the starting point of China’s take-off in 2005, and at the rate of urbanization, the demographic dividend, the outside world, attracting foreign investment and other aspects of China is very similar – that time China has experienced the baptism of the initial four years of WTO accession. And whether Vietnam can replace China’s problem Control Engineering Copyright , October 28 American channel CNBC cited several data are analyzed in detail. First, although the growth rate of Vietnam to catch up, but the difference in body mass between the two countries is really great. 100 times!
Figure 2: GDP and GDP up speed comparison between China and Vietnam (Source: CNBC)
3: in Vietnam, the US share of global manufacturing industry (Source: CNBC)
Secondly, production capacity in Vietnam limited its development, including the underdeveloped infrastructure, lack of skilled labor and power shortages imminent. Land privatization but also to the enthusiasm of the newly opened industrial park, always limited. Vietnam is also a weakness in the labor force. Although the workforce very young and growing, but in terms of scale, it is still far less than China. Vietnam is only about 100 million people, this is not easy to fill the gap. CNBC finally make a very positive conclusion, thenVietnam on body mass than the Chinese economy the world’s second-largest economy is much smaller, Vietnam does not replace China as the next global manufacturing center. It also means that any Southeast Asian country wants to replicate the successful experience of “Made in China rise”, the possibility is very low. Data provided by CNBC very solid, let us see the rapid rise of Vietnam, Vietnam also confirmed in this country it is impossible to fully replace China. And according to reports in gold saying, Vietnam in poor industrial base and industrial chain. 2005 Chinese domestic brands in the field of light industry, textiles, home appliances, and machinery and equipment have been rising, and the current Vietnamese national brands are still to speak. These conclusions from Vietnam of view is right, but the Chinese point of view, there is a huge risk. Made in China can not only clash with Vietnam, we need a new perspective to look at the problem globally distributed manufacturing. An important conclusion CNBC paradigm underlying assumptions, is still “a globalized economy + centralized manufacturing.” However, this hypothesis itself is possible there are significant deficiencies, global manufacturing will never squeeze in a “crowded factory of the world” among digital technology from a technical point of boosting the decentralized manufacturing www.cechina. cn , small factories will be distributed all over the world. The Economist Intelligence Unit report in October also said that despite the massive multinational corporations not going to pull out of China, but dispersed business will be an important strategy to mitigate the adverse effects of trade disputes. Southeast Asia is also maturing and labor markets. Everything will change. Since 1/14 Vietnam but China’s population, the Indian elephant, just like the Chinese population quite. What has happened here? There are very few women in India a few years ago, and now various local courts have open hole. A large number of foundries have been more willing to hire women workers, because women are more meticulous and more patience. Foxconn India plant women some as high as 90%, both in Taiyuan, Zhengzhou, or can not have such a ratio. Apple is the main character in this drama of the moment, Apple has adopted the tactics of a “mallard duck water”, many of Apple’s position on the surface of all the Chinese good show Control Engineering Copyright , but each generation business is on track to accelerate the migration of action ready. To investigate this possibility does not know how many times, and every time to explore all means to increase the likelihood of a point. The US market accounted for iPhGlobal sales of one 1/4, which accounted for a large part of Foxconn’s manufacturing operations in China. The final assembly areas out of China is relatively simple. If you want the entire mobile phone parts and full production out of China, it is very difficult. This matter of course is difficult, but not unthinkable. It depends Made in China countermeasures to be taken. Trade war disrupted a complex global supply chain, the supply chain involves a number of countries outside of China and the United States. Fitch rating agency Pitch analysts believe that no country “can really absorb all the production,” while trade war is the result of these production pushed away from the Chinese. Local production to cope with a trade war, just like Foxconn to set up production bases in Wisconsin. Although progress is not smooth, but some Chinese manufacturing supply chain is clearly being “out” in vitro. Because there are many Indian manufacturers to provide low-end and more affordable mobile phone, the current Apple smart phone market in India accounts for only 3%. Apple has always dreamed of owning their own flagship stores, but even the CEO Cook met with Prime Minister Modi, also to no avail. India has asked Apple must produce 30% of its products here, we were allowed to have a flagship store. Apple appears to be half and half have a new compromise considering that it has begun to gradually shift production of its latest products to India, in order to help India build a global manufacturing hub. Currently there are many Indian policy, as it twists and turns up the same tree pea sprouts. This bending manufacturing with China to form a state of offensive and defensive game. As long as India open a hole, then the pressure on China, will soon become very large. Hon Hai did not give instructions to the production out of China, and the transfer of production line is the generation of business decision made according to customer demand. Executives of the company in June this year that Foxconn 25% of capacity outside of China and is investing in India, it has the ability to put all the United States needed to iPhone production out of China. In addition to Vietnam and India, Mexico, Indonesia and Malaysia it is also considered being considered. Remark, the industry a shock. Many people thought it was just angry words, or an encouraging children to say. However, this sentence was lingering concussion strong. Apple quietly in secret with a huge punished the executive. The real strength and intentions are not on the table. Just four months later, it is now certain that India can become a major production base for Apple’s large equipment.Foxconn India is there for iPhone XR series of quality tests, and plans to begin mass production in a factory in the outskirts of Chennai. This Wistron plant in Bangalore older models of mobile phones, is quite different entirely. A great truth, exposing the big himself away. Chinese-made line of scrimmage, and then step back. Let Made in India shiny Apple did not own factories in India. However, it is dealing with a number of India as a manufacturing hub of the company. Apple recently with suppliers to explore the possibility of their manufacturing out of China. Apple agreed to Wistron manufactured in India before the iPhone 7, in which India plans to buy land and build factories just approved by the government, about 65 km from Bangalore, India’s technology hub. Wistron will invest about $ 100 million to develop the land for the production of “smart phones, networking equipment and more high-end Apple devices.” Apple has changed tactics, first stop selling low-end products; the second is to India as a manufacturing base. This of course depends on India’s policy, although it is currently very much worse from China and Vietnam. But the threat of tariffs in China is still a lot of time, this is a pit. Manufacturing strategy, precisely in order to seek to reduce its dependence on China manufacturing base. Apple has repeatedly requested the Indian government to reconsider its manufacturing policy. Reduce import duties, export again after these components are assembled. The Indian government currently is considering levying a “trivial zero tariff” for these parts. This will enable the production of Apple’s iPhone in class to benefit from Garrucha factory. Can Apple make “Made in India” shining? It depends on Apple’s commitment to the Indian government’s determination. Without depending on other factors – Suppliers can quickly put in place. In this matter, Made in China has always been in a passive situation. iPhone 11 will soon be available in India, it may also be produced in India. Apple is spending $ 1 billion to expand its production capacity in India, and will be continued. Senior partner Foxconn is naturally the main beneficiaries CONTROL ENGINEERING China Copyright , while Foxconn expertise in this area along with it to India, while other component manufacturers will also transfer the business to India . Leading a move, accompanied by Kazuma. Free cycloid, regardless of nationality. Four months ago, “Nikkei News” on the report, Apple is exploring it to 15%30% of hardware products out of the Chinese market. The company has a growing team working on the transfer of production and require Foxconn, Pegatron and Wistron Pegtron other key manufacturing partners to evaluate existing options. Apple in China directly employs about 10,000 employees. Apple will manufacture in China, it has created some five million jobs. It is not clear in these efforts, how many will be affected nearly 30 percent of Apple products relocation. This also means that China must attack and defense supply chain of quick access to a quantization stage: the only way the defense can be successfully implemented. Yes, these efforts have not moved to USA. But it is moved out of China. This shift has led the way, the US government aimed at curbing the rise of Chinese manufacturing target has been reached. If you think the factors that led to this change, simply because of the ongoing trade war between China and the US, so this recognition is also a bit too simple, do not realize that change global trends. Whether trade dispute is resolved, apples and other multinational companies are likely to shift their production. The excessive concentration of production in a country that has proved to be an uncontrollable risk. All entrepreneurs will focus on risk control, in which the tax is only a means. And China’s low birth rate, high labor costs also indicates that China must consider a defense strategy. China has around Apple created a huge logistics and parts suppliers ecosystem, production will be transferred out of a process of “painful and difficult”. China has a huge contingent of skilled workers, which is more flexible infrastructure, power shortages and other problems are less likely to occur, these are large manufacturers like China’s place. Therefore, the transfer of production will not be a quick process. However, an estimated 18 months, or will gradually produce significant results 2-3 years. By that time, the whole situation would be too passive. Sino-US trade war, appears to be a relatively recent easing of the situation. Good times and bad, but the supply chain offensive and defensive point of view, this result is not important. Accessories technology warfare is not a trade war. Technology warfare is independent, it is behind the dramatic flow of the global supply chain, like volcanic lava pouring general scattered, looking for a new order. Chinese manufacturing solid network of suppliers rift is emerging. Industrialization can reshape workers in Southeast Asia are sometimes seen as a difficult area of industrialization, Southeast Asia, people burdened with enough diligent, private ownership of land,And many other negative labels poor infrastructure. They seem to have another nickname – Tropical lazy people, it is like to do with the weather. These are seen as hard to industrial girders intrinsic gene. However, industrialization itself will reshape the workers. Industrialization brought wealth, allowing local people are reborn. Chinese smartphone market accounts for less than 1% of Samsung, September officially closed the last plant in the mainland. The peak, Samsung has 13 mobile phone factory in China, seven research and development centers. In a sense, sadly, the Samsung factory, is a sign of the rise of local brands. However, Samsung is still the world’s largest maker of mobile phones, where its capacity to go to? Vietnam! Samsung intends to continue to invest in a new factory. So far, Samsung Vietnam has eight factories and research centers, investment of more than $ 17.3 billion. It is the largest foreign investor in Vietnam, employs about 160,000 locals. In 2018 the value of goods exported from Vietnam Samsung reached $ 60 billion in the whole of Vietnam’s total exports in the world have one quarter. How fast this time? Samsung 2014 on cooperation with the Vietnamese Government to increase the cultivation of a vendor. In the year organized the “Samsung Fair”, more than 200 Vietnamese local suppliers eager to respond to Samsung’s 91 kinds of parts localization program. The result, a qualified no. To this end, Samsung plans to begin providing technical advice Control Engineering Copyright , the South Korean experts sent to Vietnam, to improve manufacturing processes. And supporting suppliers in Korea, we have begun to cultivate local manufacturers in Vietnam. It has long been a wholly-owned factory in Ningbo, a leading Korean manufacturer of injection molding machines WOOJIN Woojin, through a lot of training and machine maintenance, helping local manufacturers in Sai Kung Ninh Nguyen, Samsung’s entry into the global value chain. With strong import industrial culture, industrial soil, is changing; Vietnamese workers, will change. Of course, there are also red-hot iron manufacturer in China mainland. To pipe fittings for the main business of Jinan Mei Tak Holdings, acquired the former Thai rival –SA valve foundry. Within a year, the factory in Thailand has undergone enormous changes. New workshop staff less than a third of the old plant, the whole plant 1,300 streamlined to 300 people. But the yield is twice the original old shop. Thai staff more diligent. Two lines hanging on the wall in Thailand plant, “success is actually a method””Innovation is a kind of habit,” in fact, this is the motto from China chairman. It is the industrial culture of the dots, the local industry will change soil.
Figure 4: Jinan Jiu Germany and some of India’s state governments and even the law can be modified in the slogan Thailand factory
, in order to make way for Apple to manufacture; in Japan, even after the Meiji Restoration, the workers still lazy. Later, the Japanese factory using a series of changes such as tenure, Japanese workers today will become our admiration of hard work, dedication, patience example. Everything will change. There are lines of industrialization, have to show off the rich first, no transformation can not soil. Industrialization can not change the bone, but it can change the thinking, then change the action. What brings Foxconn: a factory top 70% of the province we all know that Foxconn, brought not only electronic products. Zhengzhou Foxconn began construction in 2010, two years after 2012, Foxconn’s import and export reached $ 29.4 billion, accounting for 57% of the import and export of machinery and electronic products in Henan Province. By 2017, Foxconn contributed 70% of import and export in Henan Province. A factory exclusive country more than two thirds, if not local to see, hard to imagine a company to influence a province so big. Today’s Zhengzhou Foxconn has 250,000 employees, is the world’s largest iPhone assembly plant, about half of Apple’s global handset production in Zhengzhou. But also indirectly 7.8 million jobs. For such a labor-exporting Henan province, which is a holding jobs at home can eat event. Also see that this is just the cake base, it is more a fulcrum Henan manufacturing, leveraging the transformation and upgrading of the industrial sector in Henan. Many intelligent terminals and information technology industries, such as tablet, smart wear, etc., are layers of radiation around the Foxconn manufacturing capacity and human resources provided. Relying on Foxconn’s huge role in promoting, Henan electronic information industry as a pillar industry in Zhengzhou airport, and the world’s largest machine tool manufacturers such as Friends of Kerry, are also settled in Zhengzhou airport. This is a huge whirlpool, vibrant. And efficient logistics system also contributed to develop an aviation port. Rise Memphis airport, and it has benefited from the year manufacturer Dell Computer maintenance strategies. Faulty computers throughout the United States, are sent to the headquarters of Dell Computer Repair in Memphis set up by courier, sent directly repaired. WithIn airports advantage, Dell will generally maintenance cycle computer, at least two weeks from the need to compress week greatly improved after-sales satisfaction. Later Nike, medical equipment manufacturers Smith & Nephew are here to buy the land to build distribution center. Zhengzhou Airport also learn from this experience, the establishment of a materials warehouse distribution center. Apple’s global handset maintenance, can be done directly in Xinzheng Free Trade Zone, also led the airport and air cargo value. Behind this is a lot of employment. Now they want to move out, this is not shirk Zhengzhou. What luxury relocation move away from China. Foxconn, a large number of people because of engineering doctorates they consider is the focus of production efficiency, overcome human weakness, or even replace human work. This is impressive. Also Taiyuan factory and factory in Zhengzhou, many jobs in Taiyuan, Zhengzhou has to see it. Behind both the power of technology, but also has a strong human factors engineering. These are the weak weak dependence on labor. The manufacturer of each country, but also to re-gather together to build a new manufacturing supply chain base. Starting this year, Google intends to Pixel smartphone production from China to Vietnam to build low-cost supply chain in Southeast Asia. The US Internet giant plans to spend much of its hardware for the US out of China, including phones and Home Pixel3a intelligent speaker. Google smart phone though inconspicuous, but shipments have tens of millions, more than doubled from a year ago. Vietnam has thus become a key part of Google is about to push the smart phone market growth. As for intelligent speakers, some products may be transferred to Thailand. China is also the column. Many brands such as a plus One Plus, Oppo and Vivo, India also has a large manufacturing facility. Millet mobile phone shipments as India’s largest brand, factory here provides a third of production capacity per year is 4-50000000 production. Do not underestimate the ability of manufacturers to adapt to the decentralized manufacturing. Group supply chain move, like the bombing of the cell, although loosed, but it will soon be directed to regroup the new target. India, plans to use five years to 2024 to the current $ 25 billion mobile phone industry, expand nearly 20 times, reaching a staggering $ 400 billion. Between the advance and retreat march, probably made in China inch head gains and losses. In Taiwan, “Business Week,” the statistics in August, 28 percent of Taiwanese shiftThe mainland, while mainland China suppliers is 43%, run faster than Taiwan.
Figure 5: Apple supplier’s home continent (Source: Taiwan’s Business Weekly)
For China, the global supply chain battle is started. If the past 20 years China has been an expansion in the supply chain, so now, China supply chain start on the defensive phase.
Figure 6: The list of enterprises to move into Vietnam (Source: CNBC)
This means that the brand manufacturers around the world, including of course the Chinese manufacturers, in places outside China, and work together to build a new supply chain system . The shift in the moat of the advantages of manufacturing in China, the gradual disintegration. Since the spontaneous overflow occurs, it will take some defensive tactics. This is what we need to carefully consider the. How long can block moat although Foxconn said it can meet the requirements of the US iPhone outside the factory in China, but a Reuters analysis of supply chain data Apple in the past five years, the findings suggest otherwise. Apple products for a variety of parts of the contract factories concentrated in China, 47.6% of the factory located in China. While some parts maker with factories in Brazil and indeed India, but they are just to meet local needs. The reasons behind this are many, including China’s labor supply mature, more advanced factories, as well as tight supply chain integration. However, the global distributed manufacturing has a different point of view. There is a bitter joke. Two people ran hard hit after the Bear attack, running in the back of people say in front of people, in fact, you then run fast you do not win big bear. In front of people, I do not need to beat the bear, I just need you ran it. Similarly, Apple’s partners do not need to have the ability to produce all of the iPhone from the factory outside China, they only need to ensure that their production is sufficient to meet demand in the US iPhone, Chinese factories can meet the needs of other parts of the world. iPhone tariff increase scheduled for December 15 to start, which makes Apple’s iPhone has plenty of time to reserve, in order to meet the needs of at least a quarter of the United States. This is the time for space suppliers shift operation. This is the conversion window of China’s manufacturing supply chain battle. As a senior research think tank of China, the National Bureau of Asian Research (National Bureau of Asian Research) recently issued the “decoupling part: US China economic competition of the new strategy,” the report, it recommended that the US government should seize the two parties and elites to contain China’s rare “short of consensus”, and quickly introduced systematic countries strategy, the consensus into legislation to achieve containment strategy for China’s long-term oriented. For example, to permanently restrict Chinese investment in sensitive areas of the United States through legislation. Academic exchange personnel should be restricted in some sectors to economic isolation. At the same time, strengthen cooperation with some global partners, achieve scientific and technological coherence of action. This means that the United States and China are determined to “semi-decoupling” – the United States against China to close part, adopt the same tactics combined to reshape the way the US strategy toward China. This is the overall strategy on the trade war.