Reuters Events | Supply Chain & Logistics Business Intelligence

Firms eye electronics manufacturing capacity expansion in both developed markets and low-cost labour locations

A race to reposition electronics and technology manufacturing and sourcing is pushing investment into Europe, North America and several growing Asian economies, particularly Vietnam and India according to new research from Maersk and Reuters Events, Supply Chain.

By shifting capacity into these locations, electronics executives are hoping to future-proof their business from the kind of disruptions that have hit the sector over the last five years, while bringing goods to market faster.

A European renaissance?

The research highlights that Europe has become a hotbed of investment, partially driven by subsidies, but mainly because of region’s workforce, its reduced distance to key markets and overall stability.

This capital expenditure is heading in two main directions, with Western Europe becoming the base for expansion of high-end chip manufacturing and Eastern Europe becoming the focus for consumer goods, final assembly and battery manufacturing

Verticals, such as home appliances and renewable energies … are considering having part of their production close to European markets, so they have quicker response times and faster delivery to their customers

For “semiconductors, the ideal countries would be those with very good bases of talents, especially for research and development, and those that can also provide the right scale of labour force,” says Coy Zhong Ping Zhang, Head of Technology Vertical in the Greater China Area for A.P. Moller – Maersk. They include “Germany, the UK or Belgium.”

Sebastien Breteau, CEO for quality control and auditing firm QIMA, highlights Intel’s plans as an example of renewed focus on Western Europe. The company is looking at “full reshoring” where the overarching aim is to “create ‘a next-generation European chip ecosystem’ with a semiconductor plant in Germany, and manufacturing in Ireland, Italy, Spain, and Poland,” he explains.

Looking further east and south “verticals, such as home appliances and renewable energies … are considering having part of their production close to European markets, so they have quicker response times and faster delivery to their customers,” explains Coy Zhang, but aiming to maintain cost advantages through flexible and cheaper locations, such as “Romania, Turkey, Slovenia, Poland, and Egypt.”

Poland is located close to Scanfil’s customers’ end markets in Central Europe, which has a positive effect on freight time and costs

The research highlights Poland alongside Romania as being notable hotspots, citing recent announcements from Intel, Samsung, Scanfil and Daikin in Poland, and Diehl and Tamura in Romania.

Scanfil noted to report authors that Poland has “as an educated workforce with good availability in the areas where Scanfil operates” and “is located close to Scanfil’s customers’ end markets in Central Europe, which has a positive effect on freight time and costs.”

Vietnam and India ascending

Citing prior Reuters Events, Supply Chain research, the white paper also spotlights Vietnam and India as among the most attractive countries globally for sourcing, nearshoring and reshoring.

When it comes to the electronics sector, Foxconn, Pegatron and Wistron have all recently committed to factories in India and JPMorgan analysts said that they believe India will make one in four iPhones within two years, even though manufacturing costs are higher than in China and quality control has been at times problematic thus far.

Vietnam’s recent list of suitors include several of the above, alongside LG and long-time investor Samsung.

It will continue to become a more important cog in global supply chains generally, but especially in electronics, particularly as government policy and its economy are massively geared towards the export market.

Both do have downsides and capacity constraints though, with energy and transport infrastructure issues, as are labour force expertise. These limits will widen the search throughout Southeast Asia. For electronics manufacturers looking to rebase low-cost manufacturing the white paper also expects the Philippines, Malaysia, Thailand and Indonesia to benefit from shifting strategies in the long term.

Click here to download the complete white paper for free.