Daikin, Hit By Beijing's Covid-Zero Policy, To Diversify Production Outside China

Wary of China's strict zero-Covid policy, Japanese Air Conditioner (AC) manufacturer Daikin Industries is said to be planning to make ACs without Chinese-made parts by March 2024.

Daikin, which is among the world's leading AC makers, will manufacture its own core components, including parts that help conserve energy.

The company will also urge its suppliers to manufacture their products outside of China, reports Nikkei Asia.

The Japanese manufacturers have been mostly reliant on China for their production and parts supplies as the country offers cheaper labour and overheads costs.

Their dependence on China is particularly high for parts used in home appliances and automobiles.

Since mid-2010s, Daikin has relied heavily on China for parts, importing 35 per cent of its needs, on a value basis. However, that figure fell to 20 per cent last year.

Further, the lockdowns to contain COVID spread in Shanghai this year led to a fall in the production of some parts, which impacted Daikin's production.

The adverse impact on Daikin's production due to China's zero-Covid policy made the company to realise the need of having contingency suppliers in other regions.

Daikin will reportedly seek to procure parts such as valves and large sheet metal from China as well as other producers in Japan and Southeast Asia.

The company will also request its suppliers, that have factories outside of China, to produce them. Further, it will also encourage suppliers that have production bases only in China, to build new facilities elsewhere.

Daikin will also provide production guidance to reduce costs, such as by introducing automated equipment, Nikkei Asia reported.