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Do the production line transfer agents of terminal enterprises need to follow up?

date: 2019-08-29
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As the trade dispute between China and the United States continues, some large terminal enterprises have moved some of their production capacity out of China. For example, apple plans to move 15% to 30% of its production capacity from China to southeast Asia, while samsung is also increasing its investment in southeast Asia and other places. These actions will bring structural changes to the whole industrial chain.The significant impact is that many domestic semiconductor distributors and traders have reduced their orders by 30 to 50 percent.



'The impact of these companies moving factories on Chinese electronics distributors is mainly as follows.First, with the relocation of end customers, especially the OEM customers, the distributor must follow the customer to expand its business in the local area to avoid the loss of this part of business.Second, is the impact of the industrial structure, many components and electronic products rely on imports, if the country also imposed tariffs on these products, it will mean that the cost of raw materials will rise, which will provide a certain market space for China's related supporting industries.



In view of these two influences, xie zhiquan also gives corresponding solutions. First, enterprises need to do the layout of globalization, so as to reduce the impact of such trade conflicts.Second, some localized product lines need to be expanded to meet the needs of this substitution.


Terminal manufacturers move their production lines to address the current impact of rising costs caused by trade conflicts, and these companies will also move related upstream manufacturers.For example, some time ago, HP, a big notebook manufacturer, asked quanta of Taiwan to move some notebook production capacity to Thailand, while dell asked compal to move some notebook production capacity to Vietnam, which means diversified production bases will become a trend.



Desktop computers (DT) will be manufactured in Thailand in the third quarter because of a 25 percent U.S. tariff, sources in the supply chain said. Laptops could be the next wave of restricted products.Take quanta as an example. According to official data, quanta's manufacturing sites in mainland China are mainly located in Shanghai, changshu, jiangsu and chongqing. The total value of quanta's factories and equipment in mainland China is about 8.2 billion yuan, accounting for more than 70% of the investment of quanta's production equipment.This also means that as an important production base of quanta, the mainland region will face no small risk of capital withdrawal.


The transfer of these contract factories will also bring chain reaction to domestic distributors. 'the departure of enterprises has a certain impact on the industrial chain,' said Chen rongqiang frankly.Because of the globalization of our economy, different enterprises are located in different industrial chains. If enterprises move to southeast Asia, India and other places, it is equivalent to our industry matching to follow up these aspects, which is a kind of follow up of all electronics manufacturing industries.'



Obviously, due to the high level of globalization of the trade market, the division of labor in the industrial chain of each enterprise is more detailed, which means that almost no enterprise can control all the manufacturing links of its products alone.Faced with the production line transfer of terminal manufacturers, the OEM and supplier in the relevant supply chain have only two choices: follow up and keep customers, or choose to abandon customers.


Ma Yingfeng face these supply chain vendor selection, argues: 'over the past few decades, to invest in mainland China factory at the beginning from Malaysia, Singapore, the United States and other countries and Taiwan, Hong Kong regions move to come over, but the interesting thing is that this time achievement of local agents growing, even though the overseas agent of mainland enterprises with rich customer resources, but also is unable to stop the rise of local agent.So from this point of view, it is difficult for domestic agents to follow manufacturers to the sea. They have a natural advantage in local services and resources.Of course, this does not mean that domestic agents do not have opportunities, the following 5G era and domestic replacement will become a good opportunity for China's agents and distributors to take off.'


Wu is optimistic about the impact of supply chain transfer. He thinks: 'the transfer of production line does not mean that there is no advantage in China. For example, if the production line of mobile phone moves back to the United States, the cost will increase by 37%, while the cost of clothing related production line moves back to the United States, the cost will increase by nearly 49%.Moreover, it is difficult to localize these products. Even after the imposition of tariffs, Chinese products still have the advantage of cost performance.At the same time, by moving production back to the United States, their labor costs will increase a lot, so there is not much advantage from the cost perspective, China is more reliable.At the same time production line transfer needs to be a process, at least 5 to 10 years, so the overall impact, but not pessimistic.'



The production line transfer of large terminal enterprises is bound to affect the whole body, and these enterprises will also drive their supply chain enterprises to move their production lines to their new factory sites, to provide themselves with more convenient and cheap services.However, for suppliers and distributors at a lower level, there are still a lot of assets in China, so it is not easy to follow up or transfer, and it will take more than five years.At the same time, the impact of enterprise production line migration is certain, but compared with the future domestic market, domestic substitution and 5G construction, etc. are all opportunities for the rapid rise of local distribution agent manufacturers.


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