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Supply Chain News: Tesla Reportedly Tells Suppliers to Stop Producing in both China and Taiwan


Geo-Political Risk – including an Invasion - is Just too High

May 29, 2024
SCDigest Editorial Staff

Is it time for Western companies to end sourcing from China and Taiwan, over fears of an armed conflict that would decimate the supply chain in both countries and - depending how it starts - boycotts of Chinese imports.

Supply Chain Digest Says...

China and Taiwan together produce the bulk of the world's advanced electronics parts and components, including displays, printed circuit boards, camera lenses and semiconductors.

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Electric car maker Tesla thinks so.

According to an article this week on the web site, Tesla has informed its suppliers that they must start building components and parts outside of both China and Taiwan - and as early as next year - due to rising geopolitical uncertainties, including a potential Chinese invasion of the Taiwanese island China considers its own.

Just last week, China conducted two days of military exercises around Taiwan, with its military calling them "strong punishment" for the self-ruled island's "separatist acts". At times, the naval and air drills encircled the island.

Telsa’s is said to have sent a message to suppliers making components such as printed circuit boards, displays and electronics control unit systems for use in Tesla models sold outside of China, according to supply chain executives with direct knowledge of the matter, Nikkei Asia reports.

"We got the request from Tesla that they hope to have components that are both OOC and OOT, meaning out of China and out of Taiwan," a source from a Taiwan-based supplier to Tesla and others told Nikkei Asia. "They hope such a proposal can materialize from next year's new projects."

Nikkie Asia also spoke with an executive from another

component supplier who said his company was ramping up capacity in Thailand because of the request.

"To many clients, including Tesla, the so-called China+1 strategy includes avoiding Taiwan as well," the executive said.

Sources say other American car makers such as General Motors and Ford have asked suppliers to study moving electronics production beyond China and Taiwan but unlike Tesla have not made it a formal requirement.

(See More Below)





Also quoted is an executive from an electronics manufacturing company, who said "We serve several American automobile makers, and Tesla is the most aggressive in terms of trying to avoid the risks surrounding China and Taiwan." He added that "It's really hard and costly to do OOC and OOT, as that is where the mature supply chain is."

Nikkei Asia also reports that China and Taiwan together produce the bulk of the world's advanced electronics parts and components, including displays, printed circuit boards, camera lenses and semiconductors. For example, an amazing 87% of Apple's top suppliers, have production facilities in China, according to Nikkei Asia analysis.

Tesla did not respond to Nikkei's request for comment on the reported sourcing strategy.

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