Japan Inc to speed up China exit in response to more tariffs

Japan Inc to speed up China exit in response to more tariffs

Having prepared for the prospect of additional US tariffs on Chinese goods, Japanese corporations with factories in China are expected to move faster in shifting production out of the country now that Washington has decided to escalate the trade war.

The US announced earlier this month that a 10 per cent duty on roughly $300bn in Chinese goods will take effect on September 1. President Donald Trump said the duty can be increased in stages and that tariffs “can be lifted to well beyond 25 per cent”.

This fourth round of tariffs would cover a broad range of products, including smartphones, game systems and clothing.

Nintendo, which currently assembles most of its Switch game systems in China, has begun moving production to Vietnam and intends to boost its output further in the southeast Asian nation.

Sony’s production of its PlayStation 4 game console, cameras and other products could be affected by the tariffs. The company has already been studying steps such as relocating production and hiking prices, so it is likely to make decisions depending on the situation. At its earnings briefing at the end of last month, Naomi Matsuoka, senior vice-president, said that she hopes to keep the operating profit impact of the fourth round of tariffs at less than ¥10bn ($94m) this fiscal year.

Sharp subsidiary Dynabook builds all of its notebook computers in China, but Sharp said it will consider moving production to its own facilities in Vietnam or to plants of Taiwanese parent Hon Hai Precision Industry — commonly known as Foxconn — if the fourth round of tariffs is implemented.

This article is from the Nikkei Asian Review, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.

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Kyocera assembles copiers and multifunction printers for the US market in China, and Europe-bound products in Vietnam.

“We will switch production between Chinese and Vietnamese facilities,” Kyocera president Hideo Tanimoto told reporters this month, after the US announced the fourth round of tariffs, which cover copiers and multifunction printers. The move is expected to cost up to several billion yen.

Ricoh moved production of US-bound multifunction printers to Thailand from China at the end of last month, and is looking at building those products for the Japanese and European markets in China instead of Thailand.

Asics’ shoes will be subject to the latest tariffs. “The impact of the tariffs will be negligible,” said president Yasuhito Hirota. “But I am concerned about slowdowns in the US and Chinese economies.”

The US-China trade frictions have crimped corporations’ appetite to invest. Panasonic’s sales of motors, sensors and other devices used in production equipment have declined as clients hold off on capital investment. The company believes that investment may cool further due to the fourth round of tariffs.

A version of this article was first published by the Nikkei Asian Review on August 5 2019. ©2019 Nikkei Inc. All rights reserved.

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