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Tariffs drive four OEM sourcing strategies and EMS China manufacturing supply chain relocation

Four (4) OEM scenarios impacted by tariffs seeking non-China EMS solutions

By Mark Zetter

Multiple EMS providers have reached out for help in developing, validating, or executing plans to relocate portions of their operations and supply chains out of China. In addition to many China EMS PCB assembly factories burdened with high customer concentrations, the primary catalyst for change is risk from tariffs, eclipsing increasing China labor costs.

One European-based EMS provider with a factory in China is being forced by their OEM customer to move $18 million annual spend out of their China facility to an alternate non-China factory. A Silicon Valley EMS provider is moving $120 million from their factory in Shenzhen to an alternate ASEAN location.

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Still, there are other stories from OEMs and EMS providers alike. And more to come. Publicly, EMS/ODM firms such as Wistron, Inventec, Quanta, AAC, ASE, Delta, and Pegatron have already disclosed intent to move some production capacity out of China, with more to announce.

Depending whether OEM customer programs are low-volume or high-volume products, product size and weight, and where OEM FGI is shipped (China-domestic, or foreign) are also contributing factors relocating production from China.

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Vietnam manufacturing tech hub: Strengths and challenges

Higher value-add manufacturing programs with China-domestic demand are less likely to move. The same goes for higher technology and high CapEx sector programs needing a more complex and diverse manufacturing base. Despite the current tariff environment, Shenzhen still remains one of the best places for manufacturing production of highly complex electronics.

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