Almost half of Japan technology firms diversifying supply chains away from China, survey shows

Kyodo News survey shows 42 per cent said they have diversified or are considering diversifying their supply chains by moving to India and Southeast Asian countries
The move comes in response to rising US-China competition over technological supremacy and concerns about potential concentration of medical production

China-Japan relations

Associated Press

Published: 10:41am, 30 Dec 2020

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Over 40 per cent of Japanese companies the government recognises as possessing sensitive technology linked to security are shifting their manufacturing bases and sources of parts supplies from China in a bid to diversify their supply chains, according to a Kyodo News survey.

The move to reduce their reliance on China and mitigate security risks comes in response to rising US-China competition over technological supremacy and concerns about potential concentration of medical production in China amid a shortage of medical supplies propelled by the coronavirus pandemic.

A total of 42 per cent, or 42 companies, of 96 respondents said they have diversified or are considering diversifying their supply chains by moving to India and Southeast Asian countries, according to the survey.

Kyodo recently surveyed some 150 major listed companies, of which 96 responded. The respondents include Canon, Toyota, KDDI, NEC, Kobe Steel and Mitsubishi Heavy Industries.

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Only three respondents said they have or will downsize operations or withdraw from China, signalling the importance of the world’s second-largest economy to many Japanese companies.

While the Japanese government has been urging firms to shift their production bases back home to avoid risks associated with China, only eight respondents said they have or are thinking about doing so.

Around 60 per cent said they have been conducting in-house training or identified their “important technologies” as Japanese businesses that deal with both the United States and China have put emphasis on implementing measures against information leaks.

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Only 27 per cent, or 26 companies, said they placed restrictions on joint research with partners that could leak technology.

Six said they have taken no such action, and one said it is conducting joint research with an entity that is subject to regulations of exports from Japan and the US, according to the survey.

A total 59 per cent, or 57 respondents, said they have introduced a system to focus on human rights in conducting business as a growing number of companies work to implement standards determining whether their products have been manufactured in forced labour conditions.

The businesses have started taking such action after it was found multinational companies made deals with Chinese factories that have been suspected of imposing forced labour on Uygurs and other ethnic minorities in China.