Manufacturing activities in China continue to face uncertainties sans a favorable breakthrough in the geopolitical tensions it is currently facing. Despite these concerns, several manufacturers believe the region can sustain its grit as a market and as a manufacturing hub, especially if the trade conflicts yield beneficial outcomes.

Integrated Micro-Electronics, Inc. (IMI) is one of the global manufacturers that maintains a huge visibility in China. However, the trade tensions hounding the region took a toll on most EMS in the region, including IMI. Particularly, the Philippine-headquartered EMS company’s 2023 sales in China declined 12 percent versus the forecast.

Nonetheless, IMI said its 2023 revenue haul from its four factory sites in China is approximately US$270 million, which is 24 percent share of the company’s global core business revenue.

“Our (China) team found many opportunities to improve our cost controls and operational efficiency to better align with the actual incoming revenue. Thus, our 2023 numbers are even better than our previous 2022 profitability performance,” said Joey S. Bantatua, IMI China Head of Operations. Bantatua is also the General Manager – Jiaxing Integrated Micro-Electronics Inc. and Speedy-Tech Electronics Co., Ltd.

Bantatua said the automotive segment remains the company’s stronghold in the region. In fact, its share in IMI China’s total revenue has been increasing for the past five years from 25.8 percent in 2019 to 52.7 percent in 2023. The industrial customer segment’s share has also been consistently high during the period.

Despite the challenges in the market, Bantatua said the resilient and empowered IMI China team understands the need to accomplish critical tasks to honor customer commitments and quality on-time deliverables. Thus, adhering to IMI’s core values, which are Integrity, Customer Focus, Concern for Others, and Excellence.

In this interview with AEI, Bantatua tracked the prospects of China both as a market and a production hub as well as the measures the company has employed in mitigating any challenges.

AEI: Can you discuss the importance of the China operations to IMI’s overall business in 2023?

Bantatua: Our regional operations team plays an important role in terms of supporting several market segments with world-class brands that are major players globally. We serve 72 percent of our finished goods for local China consumption while 28 percent are for exports.

Our 2023 sales is around US$270 million, which is 24 percent share of the company’s global core total business revenue.

We consider ourselves a dependable supplier and partner as we are the sole EMS provider to some major global brand customers. Especially, those who require complex assemblies and stricter requirements, such as ASIL D safety level in automotive applications. We can say that it is almost zero tolerance for IMI China to fail our customers or it will be too costly for us and our customers. It disrupts OEM operations as well as the availability of their products in the market.

AEI: Which specific segment do you consider as your stronghold in China?

Bantatua: IMI China’s stronghold in 2023 is coming from our automotive customers followed by the industrial customer segment. For the last five years, our automotive sales have grown from 25.8 percent share in 2019 to 52.7 percent share in 2023 while our industrial customers follow at 29.9 percent share.

AEI: Demand in the automotive segment is growing. How do you keep up with the competition in this segment?

Bantatua: Yes, the momentum in the automotive sector remains high in China. According to China Daily, retail sales of passenger cars reached 21.7 million units in 2023, up 5.6% year-on-year. Exports of passenger cars rose 62 percent from a year ago to 3.83 million units in 2023. Meanwhile, sales and exports of new energy passenger vehicles registered robust expansion in China last year with 7.74 million vehicles sold, surging 36.2 percent year-on-year. Vehicles exported reached 1.05 million, jumping 72 percent.

Our IMI China team is keeping up with the competition by staying resilient towards achieving all our customer commitments and satisfying or exceeding our customers’ expectations. While we understand the stronger competition in China, we are working our way to be even more flexible in terms of different business concepts or customized arrangements to better serve and win more local China customers according to their needs.

AEI: What kind of outlook do we expect to see in 2024 and what challenges do you see coming?

Bantatua: Our IMI China team can sustain that positive momentum towards 2024, as already shown in our January 2024 actual financial performance. The majority of our Key Process Indicator results have improved and exceeded the month’s set targets.

The only uncertain factor moving forward will be the impact of the geopolitical situation in China wherein customer production demands are dropping. Overseas requirements, especially those that are affected by the United States-China Trade war, are moving their production out of China due to higher taxes. What is left in China manufacturing will just be for local China consumption and for those few customers who cannot leave immediately due to only having the factory inside China as their only supplier. This factor slows down the momentum of the 2024 EMS business in China.

However, there can still be a possibility for a sudden shift or changes in the momentum depending on the global and political events that can happen within this year such as the United States-China trade war developments, upcoming presidential elections in the United States, and the outcome of the armed conflicts in some parts of the world.

AEI: How does IMI see China in the long term?

Bantatua: China already has a proven track record in terms of its manufacturing capability in the past decade or so. Those who have moved out of China and have started to manufacture somewhere else have struggles in terms of achieving the required consistent quality and on-time delivery of their product. Furthermore, others have also experienced high costs of production due to logistics, transport, and importation of the needed materials. If these countries who have absorbed these transfer loads from China are not able to perform at an acceptable standard, then eventually there is a big possibility that these global brands will go back to having their products manufactured in China once again. Especially, if the geopolitical situation has changed for the better.

AEI: What strategies do you think will be critical in sustaining your momentum in the region?

Bantatua: We see prospects of more potential local China customers who are creating new products and new technology innovations. These will be big opportunities for our future operations. Moreover, while our load versus our capacity is not at its peak, we will use this opportunity to expedite our four locations sites to execute the applicable IMI Global Best Practices and further optimization.

In addition, we will also upgrade and explore new opportunities to make significant improvements results in our Quality, Cost, Delivery, Service, and Efficiency. This is critical in sustaining our momentum and adapting to the new level of competition in China.

AEI: Amidst market challenges, how are you able to empower your employees to take accountability and foster an environment of teamwork?

Bantatua: We practice our IMI Core Values (Integrity, Customer Focus, Concern for Others, and Excellence). We live these values and make them our way of life.  Such culture even breaks the typical department silos, wherein every employee can find ways and given flexibility in accomplishing our common goal. Furthermore, rewards and recognition are given to the team and individuals. As such, our employees are well motivated and are willing to go the extra mile to continuously win for IMI.

28 March 2024

Cristian Canoza