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China has tremendous control over the tech world, given they are a necessary piece of the puzzle when it comes to supply chain and manufacturing. In the wake of the COVID-19 pandemic, several companies have taken steps to diversify production from China to other countries.

Now, it seems it is time to diversify the supply chain. According to this report, more than 40% of Japanese high-tech companies are transferring their manufacturing base and parts supply sources from China to achieve diversification.

These companies include government-approved companies that deal with sensitive security-related technologies. The move also aims to mitigate the security risks associated with the ongoing Sino-US trade war.

The report shows that in a survey conducted, 96 companies responded, and 42 of them have turned to or are considering diversifying their supply chains to India and Southeast Asian countries.

In addition, the three companies stated that they will have to reduce the scale of their business or withdraw from the Chinese market. Eight companies said they are considering what to do.

Twenty-six companies stated that they restricted joint research with partners because it could leak technology, and six companies have not taken any action.

The report added that after discovering that many multinational companies were trading with Chinese factories, these companies began to take such actions, which were suspected of imposing forced labor on Uyghurs and other ethnic minorities in China.