Supply-chain diversification from China creates opportunities for global power utilities and OEMs

The diversification of power equipment suppliers from China is likely to intensify as firms increasingly look to new markets in South East Asia for their supply chain needs, according to GlobalData.

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China is the largest manufacturing hub for power equipment in the world. However, companies are increasingly evaluating the efficiency and responsiveness of their supply chains to deal with the challenges that have arisen in light of the Covid-19 outbreak. The plan of diversification of suppliers from China has intensified as dependence on Chinese manufacturers has increased the vulnerability of global companies throughout the crisis. This supply-chain diversification might create opportunities for global power utilities and original equipment manufacturers (OEMs) to tap new markets in South East Asia, says GlobalData, a leading data and analytics company.

Power equipment – a prioritised industry

Global equipment exports by China stood at US$137bn in 2017. The supremacy of the Asian powerhouse as a manufacturing hub has in no small part been driven by the launch of the 10-year plan ‘Made in China 2025’ and its vision for China to lead the high-tech manufacturing sectors globally. The policy aims to use government subsidies, provide stimulus to government-owned entities, and search for intellectual property (IP) acquisition. Power equipment is one of the 10 key prioritised industries in China’s plan, alongside robotics, new energy, transport, and hi-tech medical devices.

“Tremendous opportunity” for SE Asian countries

Nonetheless, as Somik Das, Senior Power Analyst at GlobalData outlined: “The outbreak of COVID-19 stressed the need for diversification of supply and reduce reliance on one country. Post the pandemic, several US and EU firms, having their manufacturing facilities in China, want to relocate production activities to other countries in the same region,” he told us. “This creates tremendous opportunity for countries such as Thailand, Malaysia, Vietnam, Taiwan, and India.”

As companies evaluate supply chain feasibility with other nations of South East Asia, they must identify not only the risk posed by pandemics but also the overall ease of doing business. In the South East Asian region, Singapore, Hong Kong, Taiwan, Thailand, India, Vietnam and the Philippines have the highest ease of doing business scores in 2020. Hence, these would be the countries that firms would be looking at, as each has a propensity to attract various different business sectors. 

“Malaysia has the potential to attract semi-conductor businesses, Thailand to attract automotive businesses, and India would likely attract heavy electrical machinery and power electronics,” noted Mr Das in closing, adding that the shift of a portion of the pie in terms of manufacturing opportunity from China towards these countries was “inevitable”.