Global Trade Tensions Push EMS Companies to Diversify Operations
- By Lipika Agarwal
- 09 May 2025
- Business
As global trade tensions escalate between the US and China, Electronic Manufacturing Services (EMS) companies have taken measures to evaluate and diversify their operations to mitigate geopolitical uncertainties, tariffs and supply chain disruption risks.
Adopt the China Plus One Strategy
As part of their response to the U.S.-China trade conflict, many EMS providers are employing a “China-Plus-One” strategy. This involves keeping operations running in China while setting up additional manufacturing bases elsewhere, such as Vietnam, India or Mexico. Logistics firms like Kuehne+Nagel and DHL are relocating Chinese employees to regions like Hungary, Slovenia or Southeast Asia in order to support manufacturers as they navigate trade tensions.
Regionalisation and Nearshoring Trends
Regionalisation is becoming a trend, as businesses shift production closer to key markets to minimise exposure to geopolitical disruptions. According to surveys, 24% of companies are moving production steps closer geographically, while 20% are increasing self-sufficiency by decreasing external suppliers' dependence. This change can be seen clearly within the automotive sector, where Slovakia and Hungary have attracted substantial investments due to their strategic locations and supportive trade policies – something impact.economist.com recently explored extensively.
Supporting Infrastructure & Logistics Adaptation
Logistics providers like DHL are expanding operations and staffing in SEA and other regions to support these shifts. Supply chains are increasingly complex—EMS firms must manage parallel networks, localized warehouses, and agile responsive logistics in multiple regions.
Resilience Over Just-in-Time
There’s a move away from lean models toward resilient multimarket distribution and redundancy: spreading production across different regions to guard against any single-country disruption. Dual supply chains boost operational stability, even as they introduce complexity.
Challenges of Diversification
Diversifying operations presents numerous obstacles. Infrastructure limitations, workforce shortages and regulatory hurdles can thwart the establishment of new manufacturing hubs; for instance, transitioning high-value sectors such as electronics and semiconductors to new markets requires long-term planning and investment.
Strategic Alignments for EMS Providers
To address these challenges, EMS providers have adopted several strategies.
- Expanding Supplier Networks: Establishing relationships with alternative suppliers from Southeast Asia and Eastern Europe to mitigate risks in China.
- Localising Procurement: Shifting towards local procurement to shorten supply chains.
- Optimising Inventory Strategies: Assigning critical materials a sufficient supply and adopting digital tools for inventory management.
- Engaging Digital Transformation: Employing AI and big data analytics to monitor supply chains and predict risks; investing in smart manufacturing to reduce labour dependency.
Conclusion
Recent global trade tensions have highlighted the necessity of EMS providers diversifying their operations to ensure resilience and continuity. By adopting strategies such as regionalisation, expanding supplier networks, and embracing digital transformation, EMS companies can navigate through geopolitical complexities more successfully and position themselves for long-term success.
