What Display Daily thinks: If you corner a major world power, it tends to bite back, and bite back big. The existing strains in the trading relationship between China and the US are not only reshaping supply chains, but it is also accelerating China’s investment in its competitiveness.
When it comes to the display industry, I don’t think there is any doubt that the present tensions are going to accelerate Chinese manufacturers’ encroachment into new markets and a grab for market share. The US government, and Europe for that matter, are not investing in any local display technologies, and if they are, it is a tiny fraction of what is happening in China and South Korea. Even India, Japan, and Vietnam seem to be more motivated.
Display businesses, big and small, could follow the advice below and look for near-shoring or customer intimacy as protective measures, but those are not necessarily open paths for display companies. It’s better to think about how to bind yourself to Chinese partners and work around the present political animus.
The advice below is a zero-sum game approach. That’s not the kind of math that works for the display industry.
The China-US Supply Chain
There’s an interesting article in Lexology by Jonathan Bench from the law firm of Harris Bricken. It goes into a list of suggestions related to navigating supply chains in China, particularly in light of present geopolitical concerns. Bench suggests:
- The Current Situation: Geopolitical tensions between China and the U.S./EU are impacting supply chains, causing significant challenges for businesses that have traditionally relied on China for manufacturing. While some have tried to diversify their supply chain, many still heavily depend on China.
- Is it Too Late to Diversify?: No, it’s never too late, but the process will be challenging, time-consuming, and expensive. The author suggests that companies should start the process as waiting for the situation to resolve itself is risky.
- Alternatives to China: The article lists several countries, including Vietnam, India, Thailand, Philippines, South Korea, Turkey, Malaysia, Taiwan, and Mexico as potential alternative manufacturing destinations. The best fit depends on a company’s specific requirements and industry.
- Nearshoring to Mexico: The author recommends a resource that provides questions and considerations for businesses considering relocating manufacturing closer to their home market (like Mexico for U.S. companies).
- Relationships with Chinese Suppliers: Good relationships with Chinese suppliers can help in the short term, but long-term planning and strategies should not rely solely on maintaining these relationships. Companies should ensure they have enforceable contracts with Chinese partners to mitigate potential risks.
- Risk of Intellectual Property (IP) Theft: There’s a concern that as companies shift away from China, Chinese manufacturers may attempt to replicate or copy products and compete in other markets. The article suggests that keeping Chinese manufacturers busy may reduce this risk. The U.S. tariffs would discourage Chinese suppliers from selling directly in the U.S., but other markets could still be at risk.
- Legal Enforcement in China: If disputes arise, there’s uncertainty about whether a Chinese court will favorably enforce claims against a Chinese company. Having strong contracts in Chinese, compliant with Chinese laws, is a recommended starting point.
- Stay Innovative and Customer-Centric: Companies are advised to focus on innovation and customer engagement to maintain their market relevance and competitive edge. While Chinese companies might replicate products, they cannot easily replicate a company’s unique culture or customer engagement strategy.
