From Hollywood to manufacturing to internet companies, more and more American companies are decoupling or have decoupled from China. They are increasingly convinced that it is possible to succeed without China.
In early June, a Hollywood blockbuster that was not released in China reported a big box office success.
“Defender: The Lone Ranger” topped the box office with $260 million at the global box office, making it the best-ever record for Tom Cruise since he began his acting career. But the film has yet to be approved in China. In this movie, the male lead, played by Cruise, wears a jacket with the flags of four countries, the Republic of China (Taiwan), Japan, the United States, and the United Nations, stitched on it. The flag of the Republic of China is a taboo for the Chinese Communist Party (CCP).
Hollywood Doesn’t Need Chinese Market
Another 2022 Hollywood blockbuster, “Doctor Strange in the Multiverse of Madness,” is also a global success. In less than a week, the superhero film has grossed more than $200 million in North America and nearly $300 million globally.
But the film also has not yet been approved for release in China. Analysts believe that it is because a yellow The Epoch Times newspaper box appeared in the movie, visible on a street corner, as Benedict Cumberbatch, who plays Doctor Strange, battles the Gargantos on the streets of New York. The Epoch Times extensively reports on the CCP’s human rights abuses, and is therefore heavily blocked by the Chinese authorities.
Commenting on the success of “Doctor Strange In The Multiverse of Madness,” Bob Chapek, president of U.S. entertainment giant Disney, said in a post-earnings conference on May 11, “We’re pretty confident that even without China, if it were to be that we continue to have difficulties in getting titles in there, that it doesn’t really preclude our success given the relatively lower take rate that we get in the box office in China than we do across the rest of the world.”
In a May 14 article, Quebec-based Comic Book Resources also noted that, “Now that Hollywood has stopped pandering to the Chinese government, it’s time to support Chinese people—tell their stories and explore their values and beliefs, which have seldom been told on the big screen. For too long now, it’s been muffled by ignorance or authoritarianism, and it has to stop.”
Moving Manufacturing Out of China
Apple has told several contract manufacturers that it plans to increase production outside of China as the Chinese regime’s draconian lockdown policies have created chaos to the supply chains. Travel restrictions imposed by Beijing have also reduced Apple’s chances of sending executives and engineers to China, making it difficult for them to conduct on-site inspections.
Apple’s Chief Executive Tim Cook met with Vietnam’s Prime Minister in May and expressed the company’s willingness to expand its supply chain to Vietnam. In addition, AirPods Pro 2 will be mass-produced in Vietnam in the second half of this year, as revealed in late May by Ming-Chi Kuo, an analyst at TF International Securities.
On Apple’s 2020 global supplier list, which the company announced in October last year, 34 Chinese suppliers were eliminated. For example, Apple terminated its partnership with Chinese mobile phone lens maker OFILM Group in March 2021, resulting in a 93.25 percent year-on-year drop in net profit for OFILM Group in the first half of the year.
Other big companies are also retreating from China. General Motors announced earlier this year that it would spend $7 billion to expand production of electric vehicles and car batteries in Michigan. South Korean telecom giant Samsung announced last November that it would invest $17 billion to build a semiconductor factory in Texas.
Micron, an American semiconductor manufacturing company, announced in October last year that it would invest $150 billion over the next decade in leading-edge memory manufacturing and research and development, and that a large part of the expansion will occur in the United States.
A survey of 260 global supply chain leaders, conducted by research firm Gartner in February-March 2020 in the wake of the COVID-19 outbreak, found that a whopping 33 percent of companies have either moved their sourcing and manufacturing activities out of China or were considering moving out of China. The survey also found that, in fact, before the COVID-19 pandemic, the trade war had already prompted global supply chains to start their strategic withdrawals from China.
Success Without China
Many U.S. companies are doing quite well after leaving China.
Unionwear, a Newark, N.J.-based textile company that makes baseball caps, scarves, and school bags, now has its supply chain entirely in the United States. Unionwear’s president Mitch Kahn told Voice of America that the company’s performance in 2022 has been particularly good, as many wholesale buyers have now switched to purchase from domestic manufacturers, due to higher costs associated with imports.
The CCP’s strict zero-COVID policy has led to the closure of many factories and seaports in China. Companies outside China have begun to re-examine whether manufacturing in China is still their best choice.
According to Kahn, before the COVID-19 pandemic, baseball caps made by his company were about 30 to 40 percent more expensive than imported products, and school bags were about 25 percent more expensive. But now, both product lines are fully competitive with imported products, Kahn said.
There are also multinational businesses that have long withdrawn from the Chinese market, but are still successful.
In July 2019, Amazon closed its e-commerce business in China. Seven months later, Amazon’s market value reached $1 trillion, becoming the fourth U.S. listed company with a market value of over $1 trillion.
Amazon is still in the process of further retreating from China. It stopped supplying Kindle e-readers to Chinese retailers starting on June 2, and will close its Kindle e-book stores in China next year.
In September 2012, Home Depot announced its complete withdrawal from the Chinese market. The retailer’s business has continued to expand since then. In 2021, Home Depot’s net sales reached $151.2 billion, an increase of $19 billion from 2020 and a 14.4 percent increase year-over-year. During the past two years, Home Depot bucked the trend and achieved $40 billion in revenue growth.
On March 23, 2010, Google officially shut down the website Google.cn in mainland China and stopped censoring information in accordance with the CCP’s regulations. Six years later, Google’s parent company Alphabet has surpassed Apple in market value, making it the most valuable company in the world.