EMS global relocation to pace up, leading to restructured global trade

The global electronics manufacturing supply chain has been undergoing relocation in recent years due to geopolitical tensions and the pandemic. Analysts anticipate that the decline in China's population will likely hasten the pace of relocations, causing a restructuring in global trade.

Bloomberg Intelligence analysts released a note saying that the Chinese population drop accelerated in 2023. Although China may see a milder drop in 2024 due to a one-off post-pandemic surge in marriages, the declining trend will accelerate beginning in 2025.

Amid the population drop in China, Bloomberg Intelligence believes that in the years ahead, electronics manufacturers, such as Foxconn, may accelerate the relocation of their factories from China to India and Southeast Asia.

In contrast, India's population exceeded that of China in 2023, and the International Monetary Fund predicts a 4.4% growth over the next five years. Vietnam is expected to experience a population growth of 4.2% from 2023 to 2028. Besides the advantage in population, Bloomberg Intelligence said the prospect of comparatively lower wages in India would benefit electronics manufacturers in mitigating relocation expenses and realizing long-term cost savings.

DIGITIMES Research Chou Yen said in a report that India's plentiful and youthful workforce stands as a boon for the growth of the electronics industry. The United Nations' World Population Prospects reveal that the Indian population aged 15-64 is expected to make up approximately 68.9% and 67.0% of the total population in 2030 and 2050, respectively. This projection indicates India is not poised to face population aging challenges in the next two decades. Consequently, a stable domestic consumption outlook is anticipated for the foreseeable future.

The supply chain relocation is anticipated to lead to global trade restructuring. According to an analysis from the Boston Consulting Group (BCG), global goods trade is expected to grow at an average annual rate of 2.8% by 2032, lower than the predicted 3.1% annual GDP growth rate, reversing the trade trends of the past 20 years.

BCG predicts weakening trade ties between China and the US, with bilateral trade decreasing by US$197 billion in 2032 compared to the 2022 level. While the China-EU trade volume is expected to continue growing, the pace will be slower than the global average.

On the other hand, as manufacturers expand their production capacities in Southeast and South Asia, ASEAN's trade volume is expected to grow by US$1.2 trillion, with ASEAN-China trade anticipated to grow by US$616 billion. ASEAN-US and ASEAN-Japan trade volumes are expected to grow by US$390 billion.

According to BCG, India, another beneficiary of the global supply chain relocation, will likely see an average annual trade growth rate of 6.3% between 2022 and 2032, more than twice the global average.

Source: National Bureau of Statistics of China, January 2024

Source: BCG, January 2024