To say that Asia is a dominant player in manufacturing would be putting it lightly. Asian countries now account for over 37% of the world's manufacturing output and are pivotal to a wide range of industries, including medical devices, electronics, textiles, and automobiles.
What’s remarkable is how quickly the region transformed itself into a manufacturing powerhouse. According to MacroTrends, manufacturing output in East Asia and the Pacific has increased by 235% between 2004 and 2021, and it shows no sign of slowing down.
In short, the story of manufacturing in Asia is one of forward-thinking innovation and development—the region did not become a global manufacturing hub by accident.
Let’s take a closer look at manufacturing in Asia.
How Asia Became the World's Manufacturing Hub
Asian countries have become a manufacturing powerhouse by leveraging both natural advantages and forward-thinking initiatives. Here are some of the factors that have fuelled this growth:
Natural Resources in Asia
- The region is blessed with an abundance of natural resources and raw materials. China, for instance, has been able to dominate metalworking and heavy industry with rich reserves of minerals and metals. Countries like Malaysia and Indonesia, meanwhile, have harnessed their timber, palm oil, and rubber resources to lay the foundation for robust manufacturing sectors.
Asia’s Skilled Labor Force
Technological Innovation
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Asia’s adoption of technological advancements has been pivotal in boosting productivity and fostering innovation in industrial production. Robotics and automation, for example, have become integral to the region’s manufacturing operations, enabling increased efficiency, precision, and scalability.
Chinese Manufacturers Lead the Way
When people call China the “world’s factory,” they are not exaggerating. On its own, China accounts for 28% of all global manufacturing, which makes it the world manufacturing leader.
It wasn’t always this way. Between 2004 and 2021, the country's manufacturing output grew by 678% and China's manufacturing industry continues to grow. How did it get to its position?
China's journey to becoming a manufacturing giant began in the late 1970s, when the Chinese government adopted a market-oriented system. This new approach paved the way for unprecedented economic growth and development in the manufacturing sector, with China becoming an attractive destination for foreign firms, investment, and trading partners.
Here are some of the ways China was able to transform itself into the world’s factory:
Government Policies That Boosted Industrial Output:
The Chinese government has played a proactive role in shaping the manufacturing sector through various strategic policies and initiatives, these include:
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The "Made in China 2025" strategy, which encourages technological innovation, automation, and digitalization to move China up the value chain and foster high-tech industries.
- The establishment of Special Economic Zones in coastal regions, which offered preferential policies, tax incentives, and streamlined regulations, enticing international investment and foreign companies to set up manufacturing facilities within China.
- A focus on infrastructure development. The Belt and Road Initiative (BRI), as an example, is an ambitious project aimed at enhancing connectivity and trade between China and other nations. This has facilitated smoother logistics.
- Substantial support for technological research and development, which has turned the country into a global leader in domains like 5G technology, telecommunications, and renewable energy.
China's Integration into Global Supply Chains:
China’s logistics industry leads the world with 2,917 billion ton-miles of freight capacity and 110,000 km of navigable waterways. The country has also implemented a 5-year plan that further encourages research and development into intelligent warehousing, multimodal freight transportation, and intelligent transportation technology.
These factors and the country’s manufacturing efficiency have positioned it as a central hub in the global supply chain. As a result, the country plays a crucial role in various industries, including pharmaceuticals, medical device manufacturing, automotive, electronics, and textiles.
Overview of Manufacturing in Asia
While China often takes the spotlight for its manufacturing sector growth, numerous other Asian countries have also emerged as significant manufacturing hubs for global companies. These countries include:
- Japan. Known for its technological innovation, precision engineering, and commitment to quality, Japan has long been a major player in the automotive, electronics, robotics, and machinery industries. In fact, the country accounts for nearly 10% of the world’s manufacturing output.
- South Korea. A dynamic manufacturing hub, South Korea excels in electronics, automotive, and shipbuilding. Notably, it commands the memory chip market, with Samsung Electronics and SK hynix collectively holding nearly 70% of the market share. This leadership has put South Korea at the forefront of artificial intelligence, underscored by plans for a groundbreaking $230 billion chip manufacturing center.
- Taiwan. The global leader in semiconductor manufacturing, Taiwan produces over 60% of the world's semiconductors, including over 90% of the most advanced semiconductors. The country's expertise in chipmaking powers a wide range of electronic devices around the world, from mobile phones to electric cars, making it an integral manufacturing hub for the tech industry and global innovation.
- Vietnam. With expertise in electronics assembly, Vietnam has drawn investment from tech companies like Apple, Intel, and Samsung, among others. The country has also distinguished itself by producing high-quality apparel for Nike, Adidas, and more.
- Thailand. Major automotive manufacturers, including Ford, GM, Honda, and Mazda, among many others, have established production facilities in Thailand. The country’s electronics manufacturing sector, specifically semiconductors and electronic components, has seen substantial growth.
- While perhaps a bit further afield in Southeast Asia, we would be remiss not to mention the rise of India's manufacturing sector, which encompasses industries such as automotive, pharmaceuticals, information technology, textiles, and more. Much like China, India offers a large, young, and skilled workforce, which has been attracting companies seeking cost-effective production.
These other Asian countries often specialize in certain production stages or products, and thus complement each other in global supply chains. In fact, the growing synergy between China and other Asian manufacturers has contributed to a dynamic and robust manufacturing landscape in the region.
Why You Should Consider Manufacturing in Asia
Companies exploring manufacturing options should consider the following reasons to establish a presence in Asia:
Cost-effectiveness
- Asian countries match a commitment to quality with a number of cost advantages, including competitive labor costs, tax incentives, and favorable foreign investment policies.
Access to a skilled workforce
- The region boasts a skilled and adaptable labor force, well-equipped to handle complex manufacturing processes efficiently.
Technological innovation and adoption
- Asia is a leader in robotics, automation, and 5G technology, among others, allowing for advanced manufacturing capabilities and high-quality industrial output.
Access to emerging markets
- Working with Asian partners gives you, and your manufactured goods, access to growing markets within the region.
Government support
- Asian governments continue to support and incentivize manufacturers through strategic initiatives, fostering innovation, connectivity, and trade across the region.
Robust logistics and supply chain infrastructure
- Asia boasts well-developed logistics and supply chain infrastructure, providing seamless connectivity for international trade. China, for example, has the world’s most advanced rail system and the largest 5G network. A wide range of components are also manufactured in China, which helps reduce travel time and logistics planning, and optimizes assembly processes.
Proximity to major suppliers
- Being closer to major suppliers within the region can lead to faster response times, reduced lead times, and increased collaboration opportunities.
Kingstec: Your Manufacturing Partner
Kingstec has worked with leading manufacturers in Asia for over 40 years and can help your business navigate this exciting space, acting as an extension of your mechanical and electrical engineering, design, and logistics departments.
Call us today to learn how your business can partner with world-class, cost-efficient manufacturers in Asia.
