IDC Manufacturing Insights predicts that this year, Asia Pacific manufacturers will focus on entry into new markets, shift to new low cost manufacturing centres, and connected operations for greater process efficiency.
Volatility is the word that best describes the situation in 2012. Although there are scattered signs of growth across the region, the world economic situation and prospects remain challenging, and uncertain.
Concerns about the eurozone debt crisis lead to volatility continuing into 2013. With weakened US and Europe economies, Asia Pacific manufacturers are shifting their focus to intra-Asia trade and trade with other emerging regions such as Latin America, Africa and the Middle East.
Continuously weakened U.S. and Europe economy have shifted the trade pattern and business models of many Asian manufacturers. The rising middle class in the large, emerging Asia economy such as Indonesia, India, and China, will be the key drivers of future demand in the region.
In the recent years, we have seen Asian manufacturers shift focus to target domestic demands and intra-emerging market trade. This is also boosted by massive stimulus packages, including lower taxes, rebates, trade-in programs, and easier loans, as seen in China and other emerging economies around the world.
Cost reduction remains top business driver
Cost reduction, highlighted the latest IDC Manufacturing Insights survey, is top business driver for manufacturers in China, India, and the Southeast Asia (SEA) for 2012 and 2013.
Over the past few years, there has been an increased focus on the cost driver, especially by China manufacturers. Steep wage increases, typically in double digits, over the past few years are having a significant impact on China's competitive edge as the low-cost producing country in Asia.
We are seeing several big manufacturers now expanding their production facilities into other emerging economies, including IBM and Nokia setting up facilities in Vietnam, and Foxconn setting up operations in Indonesia.
However, there is still concern as to whether these other low-cost destinations have the infrastructure to support manufacturing. This is evident when visiting these countries, where issues over roads, power, and telephone connections come to the fore as soon as you get out of the major cities.
Political and geographic stability in many of these countries is also a concern, and as companies think about the need to "fulfill" a customer order, having significant risks across the supply chain will impact the decision.
With an increasing focus on manufacturing in low-cost countries, companies will increasingly move manufacturing away from headquarter functions. In countries where there are high labour costs, such as Taiwan and Japan, manufacturing organisations will move towards having "command and control" centres in their headquarters, and run their global operations from the HQ, even though the manufacturing plants will be geographically dispersed. Enabling this is improvement in bandwidths, coupled with analytic technologies and video feeds, allowing organisations to have a direct view of their operations.
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