Int’l companies shift production to Turkey amid supply chain woes

BRUSSELS

Swedish giant IKEA, Poland-based garment producer LLP, German pharmaceutical firm Boehringer Ingelheim and Belgian packaging company DW Reusables have decided to invest in production facilities in Turkey in recent days.

With its proximity to European, Middle Eastern and North African capitals, Turkey comes at the forefront as an alternative to manufacturing hubs in Asia, particularly China.

“Turkey, with its strategic location, has posed a strong alternative to pre-COVID era’s single-centered and Asian-based production network,” Turkish Vice President Fuat Oktay said on Oct. 4.

Polish garment company LLP has started explorations to shift some of its production capacity from Asia to Turkey, it said this week.

LLP officials have got into contact with Turkey’s developed garment industry leaders, it added.

Despite higher production costs compared to Asian countries, Turkey is advantageous in terms of supply chain factors, according to LLP.

German pharmaceutical firm Boehringer Ingelheim has struck a deal with Turkey’s Abdi İbrahim, which was founded in Istanbul in 1915, for the localization of its products.

Boehringer Ingelheim said this week that it is planning to conduct clinical research and to produce diabetes, central nervous system and cardiovascular drugs in Turkey.

The German pharma giants’ initial investment in Turkey will be around 150 million Turkish Liras ($16.9 million) and it will gradually increase to 1 billion liras ($112.4 million).

Belgium-based packaging company DW Reusables has decided to acquire Etap Enjeksiyon and Etap Doğan, which are Turkish producers of cases, boxes, pallets and containers. Most of those products will be exported by DW Reusables, according to a recent statement.

Swedish furniture and homeware giant IKEA is also planning to move more production to Turkey to minimize problems with global supply chains and increased shipping costs, the company’s chief financial officer for Turkey said on Oct. 6.

“Due to shipment problems we faced during the [COVID-19] pandemic, we are attempting to have more manufacturing in Turkey,” chief financial officer Kerim Nisel told Reuters, declining to estimate how much capacity might be moved.

“We all saw in the pandemic that diversification is so important,” Nisel said. “It might not be a good strategy to produce items in one country and then try to transport them all around the world,” he added.

Products it expects to make and then export from Turkey, including armchairs, bookcases, wardrobes and kitchen cabinets, are currently shipped thousands of miles from east Asia to the Middle East or European markets.

The company has seven stores in Turkey and already exports three times as much as it imports into Turkey, where it currently produces textile, glass, ceramic and metal products for global export.

Nisel said the cost of a container from east Asia had leapt from $2,000 before the COVID-19 outbreak last year to $12,000.

IKEA’s move follows similar steps by other European brands such as Benetton, which is bringing production closer to home by boosting manufacturing in Serbia, Croatia, Turkey, Tunisia and Egypt with the aim of halving production in Asia.