Vincent Dubois, Chief Executive Officer, Cogiscan

The trade tensions between the US and China, coupled with China's Zero-COVID policy, are beginning to have a significant impact on the operation and new business development of contract manufacturers with major operations in China. Customers are asking for contingency plans for moving production out of China—pointing to locations like Vietnam and India—as a hedge against future shutdowns in China.

It is clear now that China's Zero-COVID policy has been a failure as evidenced by major violent protests among its citizenry and economic suffering from lockdowns and other onerous restrictions on the movement of people. Moreover, the lockdowns and restrictions on movement and labor in the high-tech sector have depressed consumer confidence and growth, which in turn is having an impact on many other industries.

One large EMS company shared with MMI an estimate of the amount of business that might be lost in China for the next three years—25% of revenue—while the output transferring to Malaysia and Mexico would double. Eight of this company's customers are asking for an alternative manufacturing site as a contingency plan.

2023 will certainly be a contentious year with many disruptions in the supply chain and production.