Disruption, Digitisation, Resilience

18 DISRUPTION, DIGITISATION, RESILIENCE : The future of Asia-Pacific supply chains But such shifts are not without challenges, predominantly because of China’s centrality in regional supply chains. In 2019, for example, Japanese video game manufacturer Nintendo shifted the manufacturing of its Switch gaming consoles from China to Vietnam in anticipation of US tariffs on Chinese products. Following the outbreak of the covid-19 virus, however, it faced production bottlenecks in Vietnam as the supply of component parts from China was hit by the pandemic, impacting its manufacturing unit in Vietnam. 16 There are various reasons why companies look to tweak their supply chains or revamp them completely. “Labour costs” (28%), “geographic location” (25%) and “access to key markets” (16%) were picked as the most important reasons (Figure 6). Labour costs continue to remain a primary factor in investment decisions for companies across sectors (28%), pandemic or otherwise. It was picked as the top factor by 35% of respondents in the wider manufacturing sector, 33% of respondents in the food and beverage and footwear and apparel sectors, and by 30% in the healthcare/pharma sector. Labour costs continue to remain a primary factor in investment decisions for companies across sectors, pandemic or otherwise. In some instances, political relations between countries — usually directly correlated with economic ties — may also influence supply-chain Many western companies have their regional headquarters in Singapore, which throws into the spotlight its role as a conduit for capital inflows into other regional markets. Additionally, Singapore remains an attractive draw for investments in the high-tech sector (with 26.7% of all supply-chain managers in the IT/tech/ electronics sector choosing to invest in Singapore as part of their supply-chain strategy). There are various reasons why companies look to tweak their supply chains or revamp them completely. Vietnam, picked by 14% of supply-chain managers, is the most popular pick in the food and beverage (23%) sector, and the manufacturing (23%) sector (along with India and China). The results indicate that the pre-covid popularity of Vietnam as a highly sought after “plus one” destination has not subdued. Vietnam’s proximity to China benefits Vietnam, and both Chinese and non- Chinese companies continue to relocate some manufacturing to Vietnam to get around US tariffs on Chinese imports. Moreover, manufacturing infrastructure in Vietnam is attractive and labour costs remain relatively low. And importantly, Vietnam continues to adopt a trade-friendly stance as its participation in trading agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU-Vietnam FTA, UK- Vietnam FTA and the Regional Comprehensive Economic Partnership (RCEP) illustrate. 16 “Nintendo Is Likely to Suffer Global Switch Shortages From Virus.” Bloomberg . 17 February 2020. Available online at https://www.bloomberg.com/news/ articles/2020-02-17/nintendo-is-likely-to-suffer-global-switch-shortages-from-virus