Panels & Furniture Asia July/August 2020

22 | MARKET REPORT
July / August 2020, Issue 4 | Panels & Furniture Asia
Diversifying global supply chains
– What’s next for South East Asia?
By Szeto Hiu Yan
In the wake of the COVID-19 pandemic, the focus of discussion on whether foreign enterprises
will move out of China has shifted. Nowadays, the question seems to be “Will foreign enterprises
expand from China?” because by now, one thing is certain – foreign and even domestic enterprises
in China are removing some of their eggs from the China basket.
Countries in South East Asia (SEA) sit high on the list of preferred countries to relocate or build
a secondary facility in. In the context of the wood and wood products industry, which countries
will stand to gain the most? What can these countries do to seize these opportunities?
PFA seeks the opinions of several industry players and experts.
Peter Fitch,
Founder of Segamat Panel Boards
(Malaysia) and
Chairman of MMMA
Wolfgang Neeser,
Managing Director of
HOMAG Asia
Udo Mauerer,
Vice President, APAC &
China, HOMAG Asia
Fion Ng,
General Manager
of Grandwork Interior
Jirawat Tangkijngamwong, Deputy
Managing Director of Deesawat
Industries and Chairman of Thai
Timber Association
The call to diversify supply chains
away from China has been an
ongoing one in the past decade,
following wage hikes in Chinese factories
and the US-China trade dispute. But
COVID-19 was the wake-up call for many
companies, which saw massive disruption
to their supply chains and left them
scrambling to find alternative suppliers.
In late February this year, QIMA, a global
provider of supply chain compliance
solutions, polled more than 200
businesses with global supply chains;
87% of respondents said the coronavirus
pandemic would trigger significant
changes in how they manage their supply
chain. More than 50% of respondents
affected by the pandemic said they
had begun switching to suppliers in
unaffected regions.
US IMPORT OF CHINESE GOODS
HAS BEEN ON A DECLINE EVEN
BEFORE THE TRADE DISPUTE
In the case of the United States (US),
American companies have already
started to diversify their imports years
before US-China trade dispute erupted.
According to the 2019 Reshoring Index
released in March this year by American
consultancy firm Kearney, US imports
from China has been on a decline for
some time.
The Kearney China Diversification Index
(CDI), which tracks the shift in US
manufacturing imports away from China
to other Asian Low Cost Countries (LCC),
reported that while China maintains
its position as a primary producer of
manufactured goods, it has now lost
share within the CDI since 2013, the year
that Kearney first introduced the CDI.
In 2013, China held 67% of share. As
of Q4 2019, its share was down to 56%.
Of the $31 billion in US imports that
shifted from China to other Asian LCC
countries in 2019, almost half (46%)
was absorbed by Vietnam, which
exported an additional $14 billion worth
of manufacturer goods to the US in
2019 versus 2018. This is followed by
Taiwan (27%) and India (10%).
In the wood and wood products industry,
a similar trend has been observed by
industry players.
“The furniture and timber related
businesses have already started the
exit from China and this will continue.
This trend started well before COVID-19