China’s loss is Southeast Asia’s gain as supply chains shift away to cheaper climes

Southeast Asian governments have been beckoning foreign firms with cheaper labour, tax breaks and improved logistics as China’s Covid woes rumble on

But analysts say the likes of Malaysia, Thailand, Vietnam and Indonesia will long struggle to match China’s deep, integrated supply chain network

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A worker checks the packaging production line at Lego’s first Asian factory in Jiaxing. The Danish toy giant opened a new facility in Vietnam last year. Photo: AFP

Published: 8:00am, 7 Jan 2023Updated: 3:00pm, 9 Jan 2023

Global manufacturers have spread their bets to Southeast Asia – with Intel chips off to Malaysia, Apple AirPods and Lego to Vietnam and Murata capacitors to Thailand – as companies inside China brace for even more Covid-induced misery on top of earlier pandemic controls and punishing US tariffs.

While China’s troubles continue, Southeast Asian governments have been beckoning businesses their way with cheaper labour, tax breaks and improved logistics.

Amid a blizzard of warnings from foreign companies that the near-total isolation of the last three years has made the cost of operating in the country too high, China has finally relented on its strict zero-Covid policy that sparked mass protests last year.

But its reopening might already be too late as complex supply chains that take several years to embed shift away from the country, or at least diversify, analysts warn.

A medical worker takes a Covid swab sample from a worker at a factory run by Apple supplier Foxconn in Wuhan in 2021. Apple AirPods and other iPhone add-ons are now also made in Vietnam. Photo: Chinatopix via AP

Giants such as Apple, Samsung, HP and Dell are ploughing ahead with expensive moves for parts of their operations to factories in Southeast Asia, with an eye on the long-term.

Other smaller firms are relocating too, with footwear, apparel and toy manufacturers also increasingly looking to the Southeast Asia region, whose workers are now several times cheaper to hire than those in China.

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