Laptop makers are having trouble leaving the shores of China, according to a report by DigiTimes. Dell is singled out as one manufacturer encountering difficulties moving mass production from China to Vietnam after experiencing lower-than-expected production output. Due to these difficulties, which span workforce knowledge, skill, logistics and supply chains, Dell had to delay its plans to start mass production outside China by an entire quarter.
The decision to move production from one place to another isn't taken lightly. The immense costs of infrastructure and relocation pale in comparison to the effort of securing a new supply chain. Because most of the world's trading and fabrication operates close to its maximum output (and contracts are usually multi-year), it's difficult for a new client to secure the required materials while entrenching an already-settled supply chain. Of course, offering more money for the same resources is one sure way of achieving this -- but passing costs on to consumers can impact market share. And there are simply some elements of strategic relocation, such as workforce expertise, that are hard to replicate.
Despite that, it's a fact that the current geopolitical picture isn't one conducive to trust. The US and China levying economic weapons on each other brings uncertainty to any operations on Chinese soil (especially for US-based companies). Things get especially risky when a country like China can tighten the flow of rare-earth materials and other resources to foreign companies.
This tension and the subsequent lack of confidence in business conditions have been leading the West to try and cement its semiconductor business through new or revised Western-centric supply chains. The push - the idea - is that only a new supply chain beyond the control of China can ensure that materials will keep flowing for businesses. This could cause a new dualistic supply chain: an Eastern and a Western, competing and feeding the same materials through wildly different fabrication specifications. In the end, however, it'll always be a multi-year push: it takes time for even billions of dollars in funding to materialize into new fabrication facilities and their dependencies. We'll do our best to monitor how this evolving strategy pans out.
