Taiwan at the crossroads: China-free or China+?
Global supply chain restructuring that is being accelerated by the US-China trade war and the COVID-19 pandemic gears toward two directions in view of geopolitical factors: "China+1" - the business strategy to still tap the China market but diversify production to other countries to avoid punitive US tariffs on Chinese goods; and "China-free" - the initiative to drive self-sufficiency to counter China's dominance and protect national security.
The two considerations centered around China mirror something that everyone will agree: the risks of excessive concentration on China have outweighed the benefits of maintaining the status quo. China+1 will be a likely choice for most vendors based in Taiwan, a small-to-mid size economy lacking resources and isolated from the international community. However, as Taiwan is caught in the middle of a geopolitical wrangling between the US and China, vendors also may as well go with China-free at the right time.
According to Foxconn chairman Young-Way Liu, the manufacturing supply chain is to transition from the model where production bases are clustered in China - the world's factory - to regional production. Foxconn's proportion of production capacity outside of China now stands at 30%, up 20% since June 2020. It is diversifying more manufacturing to Southeast Asia, India and the Americas, each of which will have an individual manufacturing ecosystem.
