Multiregional manufacturing is becoming more common, with manufacturing facilities in Southeast and South Asia now the choice for many forward-thinking businesses. China has been the global manufacturing hub for many years. But times are changing.
Leaders considering supply chain diversification should understand the many reasons firms are shifting manufacturing out of China and the benefits that come with it.
Why Is China the Center of Global Manufacturing?
There are many reasons why businesses choose China as their manufacturing center:
- Low labor costs
- Diverse facilities in place to produce products ranging from textiles to microchips
- Established infrastructure and supply chain routes
Historically, China has been able to provide advanced manufacturing services at a low cost, which made good business sense for most consumer brands.
Explaining the Shift to Multiregional Manufacturing
These factors are no longer enough to make China the most desirable location for manufacturing. Companies are now looking to Southeast Asia manufacturing facilities in countries such as India, Vietnam, and Indonesia.
Geopolitical tensions and tariff standoffs between the United States and China have prompted companies to shift operations to these regions to maintain stability. But there are other reasons brands are exploring multiregional manufacturing.
Controlling Rising Costs
China’s low-cost labor is rising as wages increase. Many other countries can provide the same manufacturing standard at a lower price.
Related Reading: Manufacturing Consumer Goods in India vs. China
Increasing Supply Chain Resilience
Continuing tensions between the West and China could seriously disrupt the supply chain. Moving manufacturing facilities to Southeast Asia and South Asia helps ensure continuous production and the movement of goods.
Advancements in Southeast Asian Countries
The Philippines' electronics manufacturing industry is advancing swiftly enough to rival China. Indonesia has abundant resources and a huge, robust economy. Vietnam’s combination of low labor costs and high work ethic has led to rapid expansion in manufacturing. China is no longer the sole leader in consumer goods production.
Challenges and Trade-offs Surrounding Southeast Asia and South Asia Manufacturing Facilities
Supply chain diversification has its challenges:
- Infrastructure in some countries isn’t as developed as in China.
- Balancing environmental sustainability and regulatory requirements with affordability is often difficult.
- China remains the dominant player in manufacturing, making it difficult for smaller countries to attract business.
Despite these challenges, many consumer brands are seeing success by shifting at least some production into Southeast Asia and South Asia.
Embracing Supply Chain Diversification
At the recent World Economic Forum in Davos, China’s Vice Premier He Lifeng urged other leaders to view China as “economic ballast” in a world of uncertainty. However, the fact remains that the smart way to handle uncertainty is to diversify production. That’s why future-forward firms are looking to multiregional manufacturing opportunities, particularly in Southeast Asia, to ensure continuous, reliable production.
FAQs
What is supply chain diversification?
Diversify manufacturing and logistics by leveraging facilities in multiple regions. Firms investing in this will increase supply chain resilience and protect continuous production.
Should I consider diversifying my manufacturing away from China?
Yes, especially given ongoing geopolitical tensions and supply chain risks. Many excellent manufacturing facilities in Southeast Asia and South Asia are opening opportunities for brands to diversify their production hubs.
What are the challenges and trade-offs of moving to Southeast manufacturing facilities?
Some Southeast Asian and South Asian countries don’t have China's infrastructure and robust supply chain links, but they are rapidly advancing and improving.
Work With Manufacturing Experts Already Operating in Southeast Asia & South Asia
Since 2018, Genimex has been diversifying beyond China. Get started with multiregional manufacturing and discover how we can support your supply chain diversification efforts, expand your product lines, and scale your brand's impact.