The OEM and its deals with HP Inc might be affected by the new US administration’s trade and manufacturing policies, including manufacturing in China and other areas of business.
Japan Times shared an article discussing the “key focus” of new US President Donald Trump’s “inaugural address” earlier this year, which was “bringing manufacturing back to the United States and restoring employment opportunities”. The site noted in turn that “a number of American companies […] have cancelled plans to build new plants in Mexico to shift investments back to their homeland”.
It added that “if this constituted the first wave, the second may be transferring production back from China to the US, and the third might be a similar changeover from Southeast Asia”, all of which could “deal a serious unexpected blow to Japanese manufacturers that have been building a tight production network in Asia as a key source of their global competitiveness”.
The site cited Hon Hai Precision, a Taiwanese company that invested heavily in Sharp last year, and which “caught the Japanese electronics industry off-guard” recently by “announcing last month” that it would invest $7 billion (€6.6 billion) in an LCD panel plant in the US “that would be one of the largest of the latest generation”. That industry has “been concentrated in China, Japan, South Korea and Taiwan”, with new plants planned in China, which could cause “industrial warfare” and “cutthroat competition”.
Japan Times notes that with “large portions of materials and components” manufactured in Japan for such LCD panels, they cannot “be mass-produced unless 50 to 80 suppliers” are within a few hours of the plant, meaning Japanese suppliers “may have no choice but to invest in the US without any assurances of success”, while Hon Hai would be able to leverage losses from US manufacturing by being “spared of border taxes”.
It then moves on to discuss Canon, which manufactures printers, cartridges and other products in Dalian, China with HP Inc logos “because they are exclusively for supply to HP Inc on an OEM contract”, with this accounting for “roughly 20 percent of the firm’s consolidated sales”. If HP Inc decided to “shift printer production to the US in response” to Trump’s plans, Canon’s Dalian operations “could come to an abrupt end”.
In turn, it “would be suicidal for Canon to move its labour-intensive operation to the US” as “the manpower cost is three to four times higher than in China”, and even if it did switch, this “could anger the Chinese government, which had given the firm a favourable treatment for expanding its operations in China”. The site surmises that this could “possibly” result in Canon “being shut out of the Chinese market, a major source of consumption”, putting the OEM in a “catch-22 situation”.
Japan Times concluded that while Trump’s foreign policy “priorities may still not be clear, it seems clear that the president has his eyes set on realigning the global structure of manufacturing industries that have become heavily concentrated in Asia”, with Japan “whose companies have expanded their production networks more broadly across Asia than Chinese firms”, set to “bear the brunt of such an attempt”.