Famous firms pulling out of the People’s Republic
As the US-China trade war rumbles on and relations between other liberal democracies and Beijing deteriorate due to everything from intellectual property (IP) theft to human rights violations in Xinjiang and the eroding away of Hong Kong’s autonomy, many globally-renowned companies are deserting China. In fact, research firm Gartner revealed last year that a third of supply chain leaders had plans to move at least some of their manufacturing out of China before 2023. Coronavirus-related sales slumps and supply chain disruption, as well as rising production costs, have also hastened the exodus. Click or scroll through the gallery for 29 world-famous firms partially or completely pulling out of the People’s Republic.
Though the bulk of Apple’s manufacturing will remain in China, the tech giant has been encouraging its suppliers,
which include Taiwanese firm Foxconn plus Delta Electronics and Pegatron, to move up to 30% of iPhone production from China. Foxconn, for instance, is investing up to $1 billion (£762m) to expand a plant in India, while other contract manufacturers are setting up in Vietnam, Thailand, and Indonesia. Apple is also planning to have 30% of its classic AirPods produced in Vietnam instead of China, while a “significant number” of iPads are set to be produced in Vietnam as of mid-2021, according to Nikkei.
American companies aren’t the only ones beating a retreat from China. South Korea’s Samsung Electronics shut its remaining smartphone factory in the country in 2019, reportedly turning the city in which it was based into a ghost town. Further closures were announced last year, with Samsung ceasing production at its last PC plant in China in August, instead of moving operations to Vietnam, and the company also shuttered its only TV factory in the country in November.
Fellow South Korean firm LG Electronics has followed in the footsteps of Samsung and relocated the manufacturing of some of its products from China. In an effort to avert hefty US tariffs, the company shifted all production of refrigerators bound for the American market from China’s Zhejiang province to South Korea.
US teleconferencing platform Zoom has skyrocketed in popularity during the COVID-19 pandemic, but while the firm behind the app is going from strength to strength, opening new data and R&D centers in India and the US, it announced it was stopping direct sales to customers in mainland China in August last year. Its video conferencing services are still available via third-party partners.
In a bid to reduce the country’s reliance on China, the Japanese government set aside 243.5 billion yen ($2.2bn/£1.7bn) in April last year in order to incentivise domestic companies to pivot production away from the People’s Republic and into Japan and southeast Asia. Among the 87 firms that benefitted from state subsidies is world-renowned consumer electronics company Sharp, which is majority-owned by Taiwan’s Foxconn.
American firm Hasbro moved a significant proportion of its production out of China to factories in Vietnam and India. Amid the ongoing US-China trade war, the world’s number one publicly-listed toymaker expected to produce around half of goods destined for the American market in China by the end of 2020, down from just under two-thirds in 2019. Despite lower levels of production in China, importing goods is causing havoc for Hasbro as the company is one of many suffering from the global shipping container shortage that is preventing goods from being transported from China to the States. Some 50,000 Tonka toy trucks are currently believed to be stranded in a warehouse in Shenzhen, the New York Post reported.
Joining other South Korean companies such as Samsung and LG that are turning their backs on China, automaker Kia Motors shut one of its key plants in the country in 2019. The Seoul-based company has put the closure down to slumping sales in the People’s Republic as a result of a boycott in 2017 of South Korean companies, which was precipitated by the South Korean military’s deployment of a US-made missile defence system.
Hyundai Motor Group
Unsurprisingly Kia’s parent company, Hyundai Motor Group, has also taken steps to shift manufacturing away from China. With sales in the country flagging following the 2017 boycott of South Korean businesses, the company closed its Beijing plant in May 2019. The company posted operating losses of 1.152 trillion won ($1bn/£726m) in China for 2020, which was its worst performance since Hyundai Motor Group was first established in the People’s Republic in 2002. While production in China has dropped, the firm is boosting the manufacturing of its vehicles in India.
Likewise, Hyundai Mobis, which supplies parts for Hyundai Motor Group and Kia, has followed their lead by closing its plant in Beijing. Having cut production in China, the company has ramped up investment in South Korea, where it is set to build a third electric vehicle components factory in the city of Pyeongtaek. The facility should be up and running by the latter half of 2021 and is in addition to similar plants in the cities of Chungju and Ulsan.
Stanely Black & Decker
With the US-China trade war showing no sign of abating, Stanley Black & Decker is also on the move. The industrial tools and household hardware maker permanently closed its factory in Shenzhen in November after it had been in operation for 25 years. Growing competition and rising labour and land costs were cited as reasons for the closure. Stanley Black & Decker had also planned to open its brand new 425,000-square-foot, $90 million (£68.5m) factory in Fort Worth, Texas by the end of 2020, although there has been no confirmation as to whether the plant is up and running yet.
As relations between the US and China worsened and the trade conflict intensified, Dell quietly moved production and supply chains away from the People’s Republic.
In fact, the Nikkei Asian Review reported in 2019 that the Texas-headquartered tech company was planning to shift up to 30% of its notebook production out of China.
That same Nikkei Asian Review report cited anonymous sources stating that Dell competitor HP was also planning to relocate 30% of its notebook production away from China. The reasoning behind both moves was to avoid the punishing US tariffs on tech products produced in the People’s Republic for the US market.
Google is more or less blocked in China, but the search engine’s parent company Alphabet still produces hardware products in the country, although perhaps not for much longer. As supply chains have become disrupted, the tech behemoth has moved manufacturing of its flagship Pixel smartphone to Vietnam and will reportedly produce various smart home products in Thailand rather than the People’s Republic, while production of its Cloud motherboards and Nest products has relocated to Taiwan and Malaysia.
After moving production of its Surface line of notebooks and desktop PCs from the US to China in 2017, reports also suggested Microsoft was planning to move production to north Vietnam during 2020. The US tech titan has been tight-lipped about the news, but the move is thought to have been fast-tracked because of COVID-19.
Even before COVID-19 disrupted supply chains and the US-China trade war turned even uglier, American action camera company GoPro had relocated much of its US-bound manufacturing away from China to Mexico, a move that was announced back in December 2018.
Though Intel remains confident in the Chinese economy and is strongly committed to operating in the country, the Silicon Valley-based semiconductor chip maker has followed many US companies by shifting the manufacturing and assembly of some of its wares from the People’s Republic to Vietnam. Intel’s former CEO Bob Swan also wrote to then-President-Elect Joe Biden in November, outlining the necessity of a “national manufacturing strategy” to “ensure American companies compete on a level playing field” in response to the likely scenario of China dominating the semiconductor chip production industry in the next decade. The company’s new CEO Pat Gelsinger reinforced this message in March when he announced a $20 billion (£14.4bn) plan to build two new chip manufacturing facilities in Arizona.
Sony closed its smartphone plant in Beijing in 2019 and moved production to a factory near Bangkok, Thailand. However, the Japanese tech company was at pains to stress that the move was prompted by disappointing sales and rising costs in China rather than the US-China trade conflict. Sony also opted to move its regional executives from Hong Kong to Singapore in July last year.
In 2019, Nintendo moved some production of its Switch console from China to Vietnam but, like Sony, the Japanese video games company said the move has nothing to do with the US-China trade war and was more about diversifying its manufacturing options and avoiding putting all its eggs in one basket.
In light of the US-China Trade War, American sportswear and casual apparel company Under Armour has mapped out a plan to reduce its reliance on manufacturing in China in favour of countries such as Vietnam, Jordan, the Philippines and Indonesia. The company is aiming to source just 7% of its products from China by 2023, down from 18% in 2018.
Steve Madden shoes and handbags will no longer be produced in China. The New York-based fashion companies was hit by Trump administration-imposed tariffs and plans to gradually move production of its footwear and accessories to Cambodia, Brazil, Mexico and Vietnam in order to keep costs for its US customers on an even keel. After suspending the process because of the pandemic, Steve Madden had scheduled to start shifting production away from China earlier this year.
Companies are not only relocating their manufacturing operations away from China, but many foreign retailers have decided to bow out of the country altogether. They include Gap sub-brand Old Navy, which shuttered all of its 10 stores and concessions in China in March 2020, planning to focus its attention on the North American market instead.
British fashion retailer Superdry, which is known the world companies over for its coats, T-shirts and other clothing that fuse classic Americana with Japanese-inspired graphics, is also bowing out of the mainland Chinese market following a strategic review. Amid lacklustre sales, the firm decided to close 25 company-owned stores and 41 franchise locations.
Space NK has also struggled in China. Founded in London’s Covent Garden in 1993, the luxury beauty retailer entered the Chinese market in 2018 but decided last year to exit the country. Its eight locations and Tmall online store closed for good at the end of May last year.
The New York Times
The New York Times decided to move part of its Hong Kong office to Seoul, South Korea, in response to Beijing’s controversial security law which came into effect in June last year. The law curtails freedom of speech in the Special Administrative Region. According to the US news outlet, the law “unsettled news organisations and created uncertainty about [Hong Kong’s] prospects as a hub for journalism”.
The move came hot on the heels of Naver’s announced withdrawal from Hong Kong. The South Korean web services firm, which owns a majority of Line, Japan’s answer to WhatsApp, was the first major foreign company to leave the Special Administrative Region due to privacy concerns. The business planned to relocate its data backup centre to Singapore.
Taiwan’s Quanta Computer is the world’s third-biggest electronics manufacturing services company and a major supplier of data centre servers to US tech firms such as Google and Facebook. The company opted to pivot production away from China and moved some of its manufacturing from the country to a new $500 million (£383m) plant in the Taiwanese municipality of Taoyuan in 2019.