Japan's Daikin which has always relied on China for air conditioner parts in the last decade, got fed up with China's long zero COVID policy and decided to dump China for AC parts.
Daikin Industries has planned to dump China as it has failed to supply parts for the manufacturing of Air conditioners, reported The Singapore Post. Daikin's decision to find an alternative has caused a huge embarrassment to China even as relations between Japan and China completed 50 years.
Global chip shortage
In February, China tightened chip supply after it imposed a lockdown in Suzhou in Jiangsu province. The tough step had a negative impact on the chip supply and fuelled the global chip shortage, reported The Singapore Post.
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 as well. The adverse impact on Daikin's production due to China's zero-COVID policy made the company realize the need of having contingency suppliers in other regions, reported The Singapore Post.
Making air conditioners
For the past few years, Daikin has been fully relying on China for AC parts
With the rise in temperature all over the world, the Japanese tech firm wants to capture the AC market and hence it announced that it would start making air conditioners without Chinese-made parts as early as March 2024. By depending on China for chips and other items, Daikin doesn't want to suffer financial losses.
For the past few years, Daikin has been fully relying on China for AC parts. Back in 2020, 35 per cent of its air-con components were imported from China, reported The Singapore Post. However, this import record decreased to 20 per cent ever since Shanghai implemented COVID-19 lockdowns. Because of this, Daikin said it now needs contingency suppliers outside China. But, valves, large sheet metal, and other similar parts will still be Chinese-made.
Crucial chipmaking chemical
Meanwhile, Daikin explained that it would purchase other AC parts from Japan-based manufacturers, as well as other companies located in Southeast Asia, reported The Singapore Post.
A report by Nikkei stated that Daikin has developed a way to produce a crucial chipmaking chemical using raw materials from Mexico, an opportunity to reduce reliance on China. Basically, Daikin has developed a purifying process that paves the way for producing hydrofluoric acid from Mexican fluorite minerals, which is less pure than Chinese fluorite, reported The Singapore Post (ANI).
