A new report predicts that Southeast Asia could become the largest producer of notebook or laptop PCs as early as 2030, taking half of this manufacturing market. This would mark a significant shift away from China, which currently produces 90% of the 160-million-unit notebook PC sector.
Taiwan’s Market Intelligence & Consulting Institute (MIC) conducted interviews with leading PC manufacturers drawing its finding that China’s current laptop market manufacturing share could fall from 90% to just 40% by 2030. Currently SE Asia has a tiny fraction of this market, which is also predicted to grow by a further 6%, to 170 million units, this year alone.
This quickly developing manufacturing market shift is reportedly being driven by China’s rising labor costs and aspirations by PC makers to reduce their dependence on a single region. Furthermore, notebook computer demand is being fuelled by pandemic accelerated increases in home working and distance learning trends.
The MIC anticipates that Vietnam and Thailand could become major PC manufacturing hubs. The taiwanese contract manufacturer Wistron, for example, makes notebooks for U.S brands, it will manufacture in Vietnam. Fellow Taiwanese firm Compal Electronics is also considering growing its manufacturing operation in the country. There is also the potential that the world’s largest contract manufacturer, Foxconn, will begin laptop manufacture in Vietnam. Indeed generally, PricewaterhouseCoopers has suggested the Vietnamese economy could be one of the fast-growing economies and reach the global top 20 by 2050.
Thailand: manufacturing growth key to economic recovery
In Thailand, another of the largest contract manufacturers, Quanta Computer, will conduct its production. With Thailand’s tourism sector heavily impacted by Covid-19, manufacturing growth could be key to a recovery from this year’s estimated 7.7% GDP contraction.
Taiwanese contract PC manufacturers could be set to benefit from the production of budget Chromebook models made for the likes of US firm HP, China’s Lenovo Group, and Taiwanese company Asustek Computer.
In 2019, electronics brands such as Dell and HP, planned to move up to 30% of notebook production away from China, an offshoot of the bitter US-China trade war. At the same time Microsoft, Alphabet, Amazon, Sony and Nintendo were reportedly looking to port some of their game console and smart speaker production away from China. Apple, for example, had consulted with its suppliers on the cost implications moving between 15% and 30% of its production capacity from China to SE Asia amidst a restructuring of its supply chains.
Furthermore, in light of the impact of Covid-19, manufacturing experts and studies appear to be including a move away from reliance on Chinese manufacturing in recommendations for supply chain diversification. Foxconn, for example, experienced supply chain disruption due to the impact of Covid-19 in China. Foxconn’s buyers include Apple, Intel, and Sony.
Companies looking to move reliance from China are looking to SE Asia or the ASEAN region of Indonesia, the Philippines, Vietnam, Thailand, Myanmar, Malaysia, Cambodia, Laos, Singapore and Brunei. Thailand and Vietnam could immediately benefit but India and Indonesia are also countries aiming to make themselves more attractive bases for global manufacturers.
PC Manufacturing shift to SE Asia not without challenges
The American Chamber of Commerce in China conducted a manufacturing survey of 250 respondents finding that 25% could be choosing Southeast Asia but that 11% could be considering moving to Mexico, 8% India, 6% the US, 4% to East Asia, and 4% to Europe.
A shift to greater reliance on SE Asia, rather than China, will not be without its challenges. China has a multi-decade head start for its expertise and infrastructure. Though minimum wages in countries like the Philippines and Vietnam can be about a third of that in areas of China, China’s labor market has already built substantial expertise.
SE Asian countries will not only need to build their manufacturing skill bases but also key infrastructure and supply chain networks and relationships. Vietnam, for example, is already experiencing logistics pressure as its unprepared ports cope with increased demand from companies moving from China.