Chinese manufacturing city is buzzing again after being crippled by Samsung’s departure in 2019
And local owners of “cramped and simple apartments” no longer find it difficult to rent their properties, he said. Instead, they are preparing for the arrival of thousands of workers.
The 120,000 square meter (1.3 million square feet) factory that once housed Samsung’s operations still exists, but the company’s giant blue logo has been replaced by that of TCL Tonly – a Chinese service provider. manufacturing in the audiovisual products industry, a subsidiary of Chinese consumer electronics giant TCL Group, which employs more than 75,000 people worldwide.
A huge red banner, several tens of meters long, stands out prominently, proclaiming: “Officially in production from July 5th. Now hiring various positions.
Almost four months into production, recruiters are still buzzing like worker bees collecting pollen.
“As long as you are in good health, you can start working for the factory tomorrow,” proclaims a woman, hoping to attract candidates. “There are already 2,000 workers here, and we need more – cleaners, kitchen staff, storekeepers, quality inspectors, workers.”
The speed at which workers are hired there, compared to what might be possible in other countries still reeling from production shutdowns and coronavirus-induced outbreaks, raises the question of whether Samsung has done so. the right choice by moving production to Vietnam months before most. people heard of Covid-19 for the first time.
The departure from the Samsung factory in Huizhou comes at a time when the
between the United States and China was in full swing under former US President Donald Trump. His The administration’s trade policy, which used the scale of the U.S. market and tariff policies to negotiate unilateral trade deals with other countries, sought to make the global supply chain less dependent on China as a than factory in the world.
Two years later, Trump’s trade tariffs remain on the books under the president
, while the coronavirus pandemic and other factors such as sky-rocketing commodity prices have also taken a
However, the pace of supply chain shifts out of China has been significantly slower than expected, and China has used this leeway to seek more opportunities in trade and foreign affairs.
If the decoupling of benefits
, field observations show that supply chain insiders remain very cautious and hesitant to outsource production, as these determinants that seemed crucial not so long ago are quickly overshadowed by new variables.
The trend towards offshoring production will continue in the long run, but at a much slower pace and momentum, according to Liu Kaiming, director of the Institute of Contemporary Observation, which was established in 2001 and has partnered to many global brands and institutes to oversee working conditions in hundreds of factories across the continent.
“Although multinational brand customers will require suppliers to prepare at least two production bases in the future – one in China and one outside of China – the impact of the pandemic has [entrenched] the global supply chain, and there doesn’t seem to be an end in sight, ”he said.
On the other hand, in the middle of a
, labor costs account for less than 10 percent of total costs in most industries in China, and the psychological impact of tariffs has also declined significantly, according to Liu.
All of these factors are slowing the trend of offshoring out of China, and they will continue to do so until the next major political confrontation again forces Western customers to choose where to source their goods, Liu said.
Suppliers who have relocated a large part of their production capacity to South East Asia … have suffered heavy losses due to the pandemic
So far, China cannot easily be replaced by the economies of Southeast Asia, and Chinese production has remained robust during most of the pandemic. Apple supplier Foxconn last month
at its sprawling manufacturing complex in central China’s Zhengzhou City to produce the latest iPhones, while coronavirus infection rates in India and Vietnam have affected iPhone production capacity.
“What I do know is that the vast majority of SME suppliers who have not yet implemented their offshoring plans will cancel their plans,” said Gao Zhendong, an investor and consultant who has helped Chinese manufacturers exploring industrial areas in Vietnam in recent years. “This is because the suppliers who have relocated much of their production capacity to Southeast Asia over the past two years have in fact suffered heavy losses from the pandemic, but those who have not yet moved see magnificent order books. “
He specifically highlighted the factories he knows in Vietnam, with 300 to 500 employees. “Their losses are usually around 30% – as if they were making 10 million yuan in profit per year before the pandemic, but are now losing 3 million per year.”
A senior executive at a shoe company that has factories in China, India and Vietnam also spoke out on the issue, declining to give his or his company name due to the sensitivity of the issue.
“Companies that have relocated in recent years have done so in response to two main factors: one is that international brands are asking their suppliers to diversify their production capacity, and the other is that manufacturers think they are meeting production issues in China that they couldn’t solve, like rising labor costs and tariffs, ”she said.
“Even though they didn’t have a deep understanding of Southeast Asian countries like India and Vietnam, they still wanted to give it a try. And at the time, the trend was that more and more orders were leaving China to countries like Vietnam and India.
“In terms of unit cost, the past two years have brought about a major overhaul of the manufacturing industry – lockdown, decoupling, decoupling, soaring commodity and logistics prices, not just the costs of labor for the factory. And that keeps changing with new variables. For example, given the current
in China, we are also monitoring closely and discussing whether this will affect unit prices further. “
Some, like Strategic Sports, invested by Taiwan, have completely changed their resettlement plans. The headphone production company’s factory located in the manufacturing center of Dongguan, Guangdong, China, is in full swing. And there are plans to expand a new automated factory in Huizhou – the same city Samsung left – with 18 automated production lines to meet growing demand for orders from around the world.
This is a significant change from when Strategic Sports bought land in Vietnam in 2018 and planned to start production there in the third quarter of 2020, in order to diversify its operations.
“At this moment [in 2018], US customers repeatedly urged us to set up factories in Southeast Asia to increase production capacity outside of China, with the aim of cushioning the impact of the continued increase in tariffs, ”he said. said Robert He, general manager of Strategic Sports’ plant in Huizhou.
But since then, Strategic Sports has seen an increase in orders from the United States, Europe, Japan, Korea, Brazil and Australia, he said.
He also noted that Strategic Sports shipments this year are up 40% from 2019. And with the new plant in Huizhou to be commissioned next year, the entire group will have 50% capacity. more production than in 2018, with 80% of the production process being automated.
“Compared to 2018, the urgency to relocate to Vietnam has decreased… for our clients and for us,” he said. “We believe that US tariff policy should remain stable for a relatively long period of time, especially with US inflation rising sharply.”