By Kate Yuan

(JW Insights) Oct 20 -- The Dutch giant Philips will continue to source Chinese components including nuts, bolts, plastics, electronics, monitors and other semi-finished goods for its operations around the world, CEO of the Netherlands-based company Roy Jakobs told Reuters.

Making more products for China locally and buying chips from several suppliers are just two of the supply chain changes Dutch healthcare technology firm Philips is making due to rising trade tensions.

The company intends to ensure that 90% of products for the Chinese market are sourced and assembled in China by 2024 - up from 75% at present and 48% in 2022.

Philips is also changing how it procures tailor-made chips that go into its CT scanners and ultrasound machines. It now favors newer but more expensive chips to ensure they are available from several locations in a pinch.

"Before we were all seeking the optimal global supply chain efficiency," he said. Now "you need to source, manufacture and deliver much closer to your end markets" even if that means higher costs.

China, where Philips has operated for 100 years, is the company's second-largest national market after the U.S., accounting for about 13-15% of revenue with 8,000 employees and five production sites.

Philips' China business boomed before the pandemic, but that trend is slowing, Jakobs said. More modest future growth will come from China's increasing reliance on healthcare technology as its workforce shrinks and ages.

"The smaller you go in parts, the more it will get it coming out of China," he said. "Second, third, fourth tier suppliers in China do a lot for the whole world ...(realistically) there will be a certain continuous dependency on China," said Roy Jakobs, according to the Reuters report.