Siemens scours south-east Asia for offers to diversify from China

Siemens is scouting for investments in south-east Asia to diversify away from China, as multinationals work to scale back provide chain dangers in opposition to a backdrop of geopolitical pressure between the west and Beijing.

The German group, one of many world’s largest industrial conglomerates, is taking over employees and contemplating including factories in fast-growing economies together with Indonesia, Vietnam and Thailand, stated Judith Wiese, Siemens’ chief folks and sustainability officer, in an interview.

“It’s a very different area, however one which has lots of potential and with the world speaking very a lot concerning the US and China from a diversification perspective, it is extremely attention-grabbing for us,” Wiese, additionally a member of Siemens’ administration board, stated in Singapore.

Rising pressure between Washington and Beijing has made many multinationals cautious of their dependence on China. Provide chains are being hit by US efforts to curb China’s entry to cutting-edge expertise, including to shocks brought on by the nation’s former Covid-19 coverage in addition to slowing development.

Wiese stated that whereas China remained Asia’s primary manufacturing hub, it was extra simply changed as different locations developed. South-east Asia “has alternatives as a market in addition to from a producing perspective”, Wiese stated.

Siemens, a bellwether of the worldwide financial system that employs greater than 311,000 folks, has a big workplace in Singapore however China is its largest market in Asia and the second-largest abroad after the US.

In 2021, 13 per cent of group gross sales got here from China however the nation is extra essential for some divisions, comparable to Siemens’ industrial automation and digitisation arm, which in the identical yr made a fifth of revenues there.

Within the wake of Russia’s invasion of Ukraine, which has compelled Germany to reassess how its financial system might have grow to be so reliant on Russia, the nation’s industrial giants have additionally come underneath growing stress to overview their dependence on China.

Philip Buller, analyst at Berenberg, stated Siemens “can not ignore geopolitics and since Russia invaded Ukraine, each authorities on the planet has began rethinking political ties, not simply with Russia but in addition China”.

However the driving pressure behind Siemens’ funding choice, Buller stated, can be outlook on demand and development. “For a number of a long time, China has been the expansion engine, however that’s now moderating,” he added.

Advisable

Numerous multinationals are decreasing publicity to China and increase a provide chain position for different nations, in a “China plus one” manufacturing technique. Sony, Apple, Samsung and Adidas are amongst companies which have shifted manufacturing from China to south-east Asia, together with Vietnam and Thailand.

“European corporations have been slower to shift their footprint to south-east Asia, however I feel you’re going to see a rush now due to the escalating risk of confrontation and battle between the US and China,” stated one Singapore-based lawyer who advises world manufacturing companies.

India has equally profited from corporations transferring or including manufacturing traces out of China. Not like south-east Asia, the place teams should navigate various nations with totally different laws, India is a single massive market and has been touted as having potential to recreate the situations that made China the world’s manufacturing powerhouse.

Wiese stated: “When it comes to diversification [in Asia], it’s China, India and Asean [the Association of Southeast Asian Nations].”