Large technology manufacturing companies are adopting a ‘China plus one’ strategy, seeking more balance in their Asian manufacturing and diversifying risk by being less dependent on China, according to a report from Fusion Consulting. The research firm said this is in the light of China’s rising labor costs, high employee turnover and to some extent; greater bureaucracy verses some governments in South East Asia. The trend towards moving into South East Asian manufacturing bases is more about extending operations into places like Vietnam, not necessarily moving out of China. From its small base, Vietnam’s contract manufacturing is expected to surge ahead at a CAGR of 120 percent between 2006 and 2011, compared to 9 percent for Thailand, 7 percent for Singapore and 8 percent for Malaysia. Responsible for about 50 percent of the world’s electronics contract manufacturing, China will continue to dominate while South East Asian countries are expected to take a higher share of future investments.
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