Is Asia’s manufacturing industry a bubble under threat?

Is Asia’s manufacturing industry a bubble under threat?

A new report has highlighted the problems facing Asia’s manufacturing sector, as advances in technology mean that manufacturers no longer need to rely on large global factories to provide them with cost effective products. They can now create customised goods in local locations that offer customers something different to the traditional standardised items.

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The Asian economy has for many years relied heavily on traditional growth models, focusing on exports and low cost labour, but according to a report from Boston Consulting Group, this way of operating is slowly eroding, as new technology provides more efficient ways of operating. In China, the manufacturing value added (MVA) growth rate fell from 7.1% in 2015 to 6.7% in 2016.

New technology

As new technology and more efficient ways of working are introduced, such as the increasing use of conveyor systems incorporating sack tip equipment, manufacturers no longer need the low cost prices of Asian factories. A number of leading companies have already switched some of their production facilities. For instance, Adidas now produces customised lines in Germany and Foxconn assembles some electronics in Mexico and has plans to open sites in the US, as opposed to its previous reliance on Southern Chinese factories.

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Since the Second World War ended, Asian markets have used traditional manufacturing models required by global businesses to push up the affluence of many of their citizens, but as a shift to local and customised goods takes place, they have the most to lose.

If they want to succeed in the future, they will need to focus on the skills they can provide, as well as selling themselves as a key location for influencing new markets and making the most of the latest technologies and products, such as sack tip equipment, available from companies like

More than exports

Asian countries have also heavily focussed on exports, but factors such as a reduction in global trade and an increasing demand for localised goods, is threatening this business model. In recent years, the percentage of gross domestic product made up by exports has been in decline. They have seen wage increases above productivity levels, which have resulted in their cost advantage against Western nations diminishing.

In order to succeed in this new environment, they will need to focus on adopting new technologies and creating additional services that will support growth.

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