Coronavirus Tarnishes 'Made in China' Moniker

Three electronics brands -- Apple, FitBit and Tile—are among companies that plan to move some or all of their production out of China, according to Coresight Research. The trend isn't new, but a recent survey found consumers are souring on Chinese-made goods. Among U.S. shoppers, 47.8 percent said American retailers should source fewer products from China because of the coronavirus pandemic.

The U.S.-China trade war is the main driver behind the exodus of American manufacturers. But the conflict is no longer limited to the two nations. “Tension has been recently rising between China and Western countries, including Australia, the EU, the UK and the United States," Coresight said. "This report explored this new wave of foreign companies relocating their production lines out of China, following the impact of the trade war in 2019."

In May 2020, German footwear brand Von Wellx decided to move its entire production from China to India.

“Mistrust started to build due to the Covid-19 pandemic and related controversy about China’s influence on the WHO (World Health Organization),” according to the study. “Subsequently, China approved a national security law regarding Hong Kong. U.S. President Donald Trump has responded by planning to revoke Hong Kong’s special trading status with the United States.”

Apple has reportedly been in talks with Indian government officials to move 20 percent of its production capacity from China to India, Coresight said. A senior Indian government official said that Apple is expected to produce around $40 billion worth of smartphones in the country over the next five years—mostly for exports—through manufacturers Wistron and Foxconn.

The Indian government has unveiled a $7 billion scheme to bring electronics manufacturing to the country, 80 percent of which has been earmarked as production-linked incentives for mobile manufacturing activities. India hopes to increase production of mobile phones and their parts to around ¥132 billion by 2025.

Japanese consumer goods company Iris Ohyama is moving production from China to Japan in June, the report said. The company currently produces face masks in Dalian and Suzhou, with materials procured from local companies. The total cost of launching mask production in Japan will be around ¥3 billion (around $27.5 million), and the company hopes that subsidy from the Japanese government will cover 75 percent of the expense.

Iris Ohyama is the first Japanese company to receive a government subsidy to shift production. The Japanese government announced in April that it would provide $2.2 billion for companies that are reorganizing their supply chains, such as moving production back to Japan or diversifying their production bases into Southeast Asia.

Consumers are expressing negative sentiment toward China, the survey found.

Some 47.8 percent of respondents stated that they either agree or strongly agree with the statement, “U.S. retailers should source fewer products from China.”
Some 39.7 percent of respondents said that the coronavirus pandemic has made them less willing to buy “Made in China” products.

This indicates the mistrust among U.S. consumers about China-made products and quantifies U.S. backlash over the nation's handling of the coronavirus.

U.S. retailers may need to urgently review the extent of their reliance on China as a manufacturing hub and to evaluate whether the “Made in China” label is a concern for their global consumer base, Coresignt added.

“Note that there is an eight-percentage-point gap between the two viewpoints described above—that U.S. retailers should reduce their sourcing there and that the Covid-19 pandemic has dampened consumers’ willingness to buy ‘Made in China’ products. It is possible that a segment of U.S. consumers already held negative views about sourcing in China prior to the coronavirus crisis, and their willingness to buy products made there has therefore not changed,” said Coresight.