The US-China trade adjustments have led to supply chain restructuring, prompting companies to seek “China + 1” or even broader global deployments to mitigate risks and increase resilience. Companies are shifting production bases to “alternative” or “transit” countries such as Vietnam and Mexico, and actively exploring opportunities in emerging markets like Eastern Europe and Africa. This has propelled ASEAN and other regions to become new manufacturing hubs, but it also presents companies with the challenge of balancing efficiency and risk mitigation, and the need to adapt to different regulations and management models in various regions.
I. Key Trends in Supply Chain Adjustment
Diversification:
Companies are no longer reliant on a single country, but are adopting “China + 1” or “Taiwan + 1” strategies to diversify risks globally.
Exploration of Emerging Markets:
In addition to ASEAN countries, companies are also establishing factories in emerging markets such as Eastern Europe and Africa. For example, Taiwanese companies have set up factories in the Czech Republic, Poland, South Africa, and Ethiopia.
The Rise of Regional Manufacturing Centers:
With the trend of “localization” or “regionalization,” downstream manufacturers are beginning to establish regional manufacturing centers to reduce transportation costs and supply chain risks. Enhanced Digital Capabilities:
Faced with new deployment challenges, companies leverage technologies such as digital twins to quickly simulate and optimize production line configurations in new factories, enhancing their ability to rapidly replicate factory setups.
II. Impact on Enterprises
Changes in Cost Structure:
While shifting supply chains can reduce dependence on China, it may also present challenges in finding sufficiently flexible and reliable suppliers in new markets.
Regulatory and Management Complexity:
Companies need to adapt to the laws, regulations, and employee management methods of different countries, increasing operational complexity.
Talent Development Challenges:
Setting up factories in emerging markets requires investment in developing local talent, such as by referencing TSMC’s apprenticeship program.
Impact at the National and Regional Levels
Challenges from Mainland China:
Despite ongoing tariff pressures, Mainland China’s trade surplus is projected to reach a record high in the first half of 2025. However, to maintain export momentum, it may accelerate the relocation of industrial supply chains to overseas economic and trade cooperation zones. Opportunities for ASEAN
Countries:
ASEAN countries, due to their geographical location and lower wages, have become the preferred destination for companies relocating their supply chains, thus enhancing their export competitiveness.
Taiwan’s Response:
After several supply chain relocations, Taiwanese companies have developed the ability to flexibly adjust their global layout and are actively exploring the potential of emerging markets.
Overall, the US-China trade adjustments have not only changed bilateral economic and trade relations but also prompted global supply chains to develop towards greater resilience, diversification, and regionalization, bringing new challenges and opportunities to businesses.
➤ UCK Recommendations: The following points can be considered in supply chain configuration strategies:
Diversify Production Bases
- Diversify production capacity to Southeast Asia (Vietnam, Thailand, Malaysia), Mexico, and India to reduce dependence on a single region (especially mainland China).
- Adopt a “China+1” or “China+2” model: Retain some production capacity in China to maintain economies of scale and the local market, but increase other locations to support exports.
[Short-term response strategy: No relocation of production sites for now; Long-term strategic plan—assessing production site relocation]
Dual-track market strategy
- US market products: Prioritize supply from non-China bases to avoid tariff impacts.
- China and Asia-Pacific market products: Continuously supply from China bases to maintain price competitiveness and supply stability.
Localization sourcing and supplier development
- Cultivate local suppliers at the new production base, gradually establishing a local component sourcing ratio.
- Sign strategic cooperation agreements (long-term contracts, price agreements) with core suppliers to ensure stable supply.
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