The New Plan for Western Tech Companies Is ABC: 'Anything But China'

As U.S.-China tensions rise, more tech businesses are moving their production elsewhere

- Liza Lin

For a growing number of Western tech companies, "Anything But China" is the order of the day. In recent years, many multinationals decided they had become overreliant on suppliers in China, prompting them to pursue a so-called "China Plus 1" strategy of augmenting China-based suppliers with those in other countries.

Now, with U.S.-China tensions soaring again, many tech businesses are accelerating moves to shift production out of China and look for suppliers elsewhere, signifying a global tech world that is increasingly bifurcated between the two powers. "Everybody is trying to look for an alternative to China," said Wong Siew Hai, the head of the Semiconductor Industry Association in Malaysia, a destination for many tech companies leaving China. "Companies are redesigning their business. There's no more 'just-in-time' strategy. Some people call this new strategy 'just in case.'"

The trend is throwing up opportunities for countries in Asia and Latin America to move up the value chain. It is also pushing Chinese suppliers to expand overseas at a faster clip, as many set up plants beyond their borders at the request of Western customers.

Unlike the first wave of diversification, when companies moved only the assembly of products outside of China, the current phase has involved shifting factories making components such as sensors, printed circuit boards and power electronics, according to a recent report by S&P. Such moves involve heavy upfront investments in machinery and parts, making the relocation in supply chains away from China much more permanent, S&P analysts wrote.

China's draconian Covid-19 lockdowns, which caused production snarls in everything from iPhones to cars, triggered a large exodus of Western companies from China to places such as Vietnam and India. Since then, the battle between the U.S. and China over who holds the keys to the most critical technologies of the future has accelerated the shift.