Several U.S.-based technology giants who include Microsoft, HP, and Dell are reportedly looking at moving substantial amounts of their production out of China. Spurred on by the ongoing so-called ‘trade war’ between the two countries, such dramatic moves could pose a major blow to the Chinese economy.
Despite U.S. President Donald Trump and Chinese President Xi Jingping reportedly negotiating a truce at last week’s G20 summit, Nikkei Asian Review reported:
“Tech companies’ plans, [which are being] spurred by the bitter trade battle between Washington and Beijing, have not changed despite the truce that was struck between U.S. President Donald Trump and Chinese President Xi Jinping at last weekend’s Group of 20 summit in Osaka. Multiple sources said the situation was still too uncertain, while rising costs in China were also prompting manufacturers to examine alternatives.”
How Damaging Could This Be?
To appreciate just how big of an impact a mass exodus out of China could have on the country’s economy, we need to look at the numbers.
Dell and HP are two of the world’s biggest PC manufacturers. According to data from 2018, Leonovo is the largest with a 22.5 per cent market share, whereas HP and Dell come in at number two and thee with 21.7 per cent and 16.2 per cent respectively.
Image courtesy of Sky News.
Given that HP and Dell export almost 50 per cent of their laptops and PCs from China to the U.S., the ramifications could be huge. China is the world’s largest producer of PCs, laptop, smartphones, and electronic devices and the market is worth over $1 trillion per year.
Any moves out of China will be a major blow to the country. China’s electronics exports have contributed massively to the country’s consistent growth since the mid-1990s.
Darson Chiu, a trade economist at the Taiwan Institute of Economic Research said that “Southeast Asian countries and India will together become new competitive hubs in coming years for electronics production”.
Who Else May Be Leaving?
According to the Nikkei Asian Review, citing “multiple sources”, other leading tech manufacturers such as Acer, Asustek, Sony, Nintendo, Google, and Amazon may also up and leave, with Sony and Nintendo moving some of their games console manufacturing out, and Amazon and Google moving their smart speaker manufacturing.
If Microsoft et al do leave, though, they will not be the first to do so. In June, it was reported that Apple had already begun exploring the possibilities and cost implications of moving production of its smartphones. In addition, and Inventec, Foxconn, and Quanta Computer have already shifted some of their production efforts to the likes of Taiwan and the Czech Republic.
At the time of writing, none of the tech firms mentioned here have made a public statement or spoken to any news sources about the accuracy of the claims made by Nikkei Asian Review. Given the current complex situation between the U.S. and China, though, it is not as though a mass U.S. exodus of tech firms from China is a far-fetched idea.