The Altasian option

https://www.economist.com/business/2023/02/20/global-firms-are-eyeing-asian-alternatives-to-chinese-manufacturing

The alternative Asian supply chain - call it Altasia - has distinct strengths, from Japan's high skills and deep pockets to India's low wages. It looks evenly matched with China in heft, or better (see map), from collective working-age population, hourly manufacturing wages, to exporting power.

Altasia has also become more economically integrated. All of it bar India, Bangladesh and Taiwan has signed on the Regional Comprehensive Economic Partnership (RCEP, which also includes China). Most Altasian nations are members of the Indo-Pacific Economic Framework, a newish American initiative. Brunei, Japan, Malaysia, Singapore and Vietnam belong to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which also includes Canada, Chile, Mexico, and Peru.

Now more non-Altasian firms are eyeing the region. Google is shifting the outsourced production of its newest Pixel smartphones from China to Vietnam. The share of iPhones made in India is expected to rise from around one in 20 last year to perhaps one in four by 2025.

Malaysia already exports around 10% of world's chips by value, more than America. ASEAN countries account for more than a quarter of global exports of integrated circuits, easily surpassing China's 18%. And that lead is growing. Qualcomm opened its first research and development center in Vietnam in 2020.

China's huge advantage has historically been its vast single market. For Altasia to truly rival China, its supply chain will need to become far more integrated and efficient. India, on whose 1.4bn people Altasia's big hinge, seems in no rush to join RCEP. These anyway lack bite: America is in a protectionist mood and has offered neither tariff cuts nor better access to its vast market. America may yet realize that reducing its reliance on China in practice requires closer ties with friendly countries. And as a budding alternative to China, Altasia has no equal.

Our Korea partner NH???? hosts a flagship conference on May 23-24 in Seoul, Korea - one of the main Altasia members. Please let us know if you are joining the event.