Chinese media reported on the 4th that multinational auto parts firms are travelling to China in succession to win orders, mainly through joint development agreements with carmakers and expanded local research bases.

The driver is shorter development cycles. Electrified and intelligent driving components turn over quickly between models, so suppliers must be embedded from the earliest design stage to stand a chance of adoption. Physical proximity converts directly into order probability.

The second factor is scale. Batteries, motors and power semiconductors are items whose unit costs fall rapidly with volume, making it cheaper to build supply chains inside the market where mass production happens.

There is counter-pressure, however. Many governments hold supply chain diversification and expanded domestic production as policy goals, so companies increasingly adopt a dual structure, maintaining bases both in China and outside it.

Korean parts makers face the same choice. Where their carmaker customers place production determines investment priorities, which in turn feeds through to domestic employment and utilisation rates at regional industrial complexes.