Supply chains exiting China far faster than anticipated

Rattled by China’s stringent Covid-19 restrictions and deteriorating US-China relations, many large companies are exiting China and re-establishing their supply chains in neighboring nations like India and Vietnam- two of the largest beneficiaries of a realignment in the global supply chain.

The U.S headquartered technology company Apple is also witnessing its suppliers leave their sophisticated Chinese supply chains which took decades to build.

Kazuyoshi Yoshinaga, Vice President of Goertek- one of Apple’s largest acoustic products suppliers in a recent interaction with Bloomberg was quoted as saying that Apple suppliers, including Goertek, have been moving manufacturing capacity out of China faster than observers had anticipated as US-China relations continue to deteriorate, laying bare the fact that China is losing some of its supply chain dominance to India and Vietnam.

Now, in a surprise move, Goertek in a stock exchange filing has announced that due to some ‘personal reasons’ Kazuyoshi Yoshinaga is leaving the company. In the statement, the company dint mentioned his recent statement, and there is no proof to show the relation between his resignation and the fact that he was among the first to paint a gloomy picture of the future of the Chinese manufacturing sector.

In the past few months, Taiwan’s Foxconn Technology Group China’s Goertek, and Luxshare have all increased their investments in India and Vietnam, as the Chinese supply chains built by the US tech giants have now begun to show cracks.

Last year, efforts by Foxconn’s Zhengzhou plant to implement Beijing’s zero-Covid curbs, while scrambling to churn out Apple’s iPhone 14 orders, backfired, leading to violent clashes and a worker exodus that slowed production at the world’s largest iPhone factory ahead of the holiday shopping season, South China Morning Post reported.

Now, forced to admit the failure of its once-reliable Chinese supply chain, Apple now has been asking its mainland Chinese-based suppliers to speed up plans to set up factories outside of China. However, neither Apple nor its Chinese suppliers, including Goertek, Luxshare, and Foxconn, had publicly acknowledged doing so, until Yoshinaga made his statement.

So far the Chinese government, making no public comment has maintained silence on Apple asking its suppliers to set up factories elsewhere. But, the nation is still emerging from three years long strict Covid curbs and Beijing is looking to shore up a slowing economy, vowing to secure its supply chain.

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