MULTINATIONAL COMPANIES MOVING OUT OF CHINA
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Famous firms pulling out of the People's Republic
As the US-China trade war rumbles on and relations between other liberal democracies and Beijing deteriorate due to everything from intellectual property (IP) theft to human rights violations in Xinjiang and the eroding away of Hong Kong's autonomy, many globally-renowned companies are deserting China.
In fact, research firm Gartner revealed last year that a third of supply chain leaders had plans to move at least some of their manufacturing out of China before 2023. Coronavirus-related sales slumps and supply chain disruption, as well as rising production costs, have also hastened the exodus. Read on to discover which world-famous firms are partially or completely pulling out of the People's Republic. All dollar amounts in US dollars.
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Nike
A study by the UBS Evidence Lab found that a staggering 76% of US companies with factories in China were in the process of or considering moving operations to other countries in 2020. They include sportswear colossus Nike. The firm's suppliers have been relocating production facilities to southeast Asia and Africa for some time now, and the company reviewed its supply chains in Xinjiang too following stories of the mistreatment of Muslim Uyghurs in the region.
Swathes of Chinese people then boycotted international brands such as Nike who chose to speak out against what was happening in Xinjiang. Sales were down by 59% in April compared to the previous year as shoppers turned to domestic companies instead, according to Morningstar Inc.
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Apple
Though the bulk of Apple's manufacturing will remain in China, the tech giant has been encouraging its suppliers, which include Taiwanese firm Foxconn plus Delta Electronics and Pegatron, to move up to 30% of iPhone production from China. Foxconn, for instance, is investing up to $1 billion (£762m) to expand a plant in India, while other contract manufacturers are setting up in Vietnam, Thailand and Indonesia. Apple is also planning to have 30% of its classic AirPods produced in Vietnam instead of China, while a “significant number” of iPads were set to be produced in Vietnam as of mid-2021, according to
Nikkei. That said, Vietnam has been hit particularly badly by the Delta variant of coronavirus, which has caused delays to Apple’s transition into the country.
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Samsung Electronics
American companies aren't the only ones beating a retreat from China. South Korea's Samsung Electronics shut its remaining smartphone factory in the country in 2019, reportedly turning the city in which it was based into a ghost town. Further closures were announced last year, with Samsung ceasing production at its last PC plant in China in August, instead moving operations to Vietnam, and the company also shuttered its only TV factory in the country last November.
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LG Electronics
Fellow South Korean firm LG Electronics has followed in the footsteps of Samsung and relocated the manufacturing of some of its products from China. In an effort to avert hefty US tariffs, the company shifted all production of refrigerators bound for the American market from China's Zhejiang province to South Korea.
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Adidas
Almost a quarter of German companies operating in China were planning to relocate production from the country in 2019, according to a report by the German Chamber of Commerce in China. For example, Adidas has halved its Chinese manufacturing since 2010, with much of the production moving to Vietnam, and pledged in July last year to cut all ties with suppliers implicated in a report that uncovered forced labour being used in some factories.
Like Apple, Adidas also felt the impacts of Vietnam’s rising COVID-19 infection rate, which has stalled production since mid-July and is expected to cause losses of up to $600 million (£431m) during the latter half of 2021. Adidas also saw its sales plummet on Chinese ecommerce giant Alibaba after the company took a stand against the treatment of Uyghurs in the Xinjiang region. In April, sales dropped 78% compared to the same period in 2020, according to Morningstar Inc.
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Puma
Adidas' German arch-rival Puma is shifting production away from China as well. The company, which makes more than a quarter of its products in the People's Republic, is keen to diversify its manufacturing base and supply chains, not to mention avoid US tariffs by producing more of its running shoes, sportswear and other products in Bangladesh, Cambodia, Indonesia and Vietnam. The brand faced online attacks in March following statements it made about the treatment of Uyghur Muslims in China, which prompted uncertainty about the company’s future sales in the country. Sales did slow after a strong first quarter, and Puma CEO Bjorn Gulden said: “There is less activity in the Western brand stores [in China] than there would have been if tension wasn’t there”.
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Zoom
US teleconferencing platform Zoom has skyrocketed in popularity during the COVID-19 pandemic, but while the firm behind the app is going from strength to strength, opening new data and R&D centres in India and the US, it announced it was stopping direct sales to customers in mainland China in August last year. Its video conferencing services are still available via third-party partners.
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Sharp
In a bid to reduce the country's reliance on China, the Japanese government set aside 243.5 billion yen ($2.2bn/£1.7bn) in April last year in order to incentivise domestic companies to pivot production away from the People's Republic and into Japan and southeast Asia. Among the 87 firms that benefitted from state subsidies is world-renowned consumer electronics company Sharp, which is majority-owned by Taiwan's Foxconn.