Take a look at what is happening in global supply chains: Taiwan has received NT$1.13 trillion (US$39.08 billion) of investment pledges from companies to move parts of their production lines back home; India is emerging as the world’s second-largest smartphone manufacturer, as large companies such as Apple Inc move their operations there; and Japan plans to significantly ramp up a program encouraging businesses to build production sites in Southeast Asia to diversify supply chains out of China.
If there were any doubt about the effects of the US-China trade dispute and the COVID-19 pandemic on the landscape of global supply chains, the news that continues to come through should make it crystal clear: There is an increasing need to make supply chains more flexible and resilient in the post-COVID-19 world.
That is because there is growing awareness that supply chains have become weak and vulnerable to events beyond the control of those who manage or rely on them.
A report issued in August by global consultancy McKinsey & Co — Risk, resilience, and rebalancing in global value chains — indicated that under the threats of trade disputes, cyberattacks, pandemics and a number of climate-related events, companies in the next three to five years might move production of a quarter of global goods to new countries.
Based on McKinsey’s estimate of how much global trade could relocate, 16 to 26 percent of global exports, including pharmaceuticals, apparel, communication equipment and petroleum products — worth US$2.9 trillion to US$4.6 trillion in 2018 — could be in play.
The aforementioned risks often have severe repercussions on how businesses operate. For instance, McKinsey said that companies would need to strike a balance between their “just-in-time” lean production systems and a new “just-in-case” mindset of having sufficient backup inventory of key raw materials and safety stock of finished goods.
This could minimize the financial impact of disrupted supplies, as well as position companies to meet sudden spikes in demand, according to the report, which also suggested that companies deploy digital systems, analytics and cash management tools that could keep production going in the wake of any shocks.
For Taiwanese companies, suppliers in China have long been their major partners, but it appears that those in the home market are their most reliable partners for sourcing products. However, what happens when a shock strikes and they need to reroute production elsewhere?
Facing this uncertainty, Taiwanese companies should give more than a second glance at emerging markets, even though some of these nations have already been targeted by the New Southbound Policy launched by President Tsai Ing-wen (蔡英文) four years ago.
There are clear signs that India, Vietnam and several other Southeast Asian economies are eager to become part of global supply chains — and have invested more in infrastructure and education in the past few years.
In the past two decades, global multinationals have benefited from China’s cheap production costs, but the COVID-19 pandemic has exposed the shortcomings of their over-reliance on Chinese supply chains.
Most businesses are rethinking the importance of diversifying to a broader portfolio of suppliers, hoping that in a disaster, alternate sources can be secured quickly and cost-effectively.
For policymakers, reshaping Taiwan’s supply chain strategies must make flexibility and resilience the focal point, and they should strive to balance risk diversification and production efficiency.
A gap appears to be emerging between Washington’s foreign policy elites and the broader American public on how the United States should respond to China’s rise. From my vantage working at a think tank in Washington, DC, and through regular travel around the United States, I increasingly experience two distinct discussions. This divergence — between America’s elite hawkishness and public caution — may become one of the least appreciated and most consequential external factors influencing Taiwan’s security environment in the years ahead. Within the American policy community, the dominant view of China has grown unmistakably tough. Many members of Congress, as
The Hong Kong government on Monday gazetted sweeping amendments to the implementation rules of Article 43 of its National Security Law. There was no legislative debate, no public consultation and no transition period. By the time the ink dried on the gazette, the new powers were already in force. This move effectively bypassed Hong Kong’s Legislative Council. The rules were enacted by the Hong Kong chief executive, in conjunction with the Committee for Safeguarding National Security — a body shielded from judicial review and accountable only to Beijing. What is presented as “procedural refinement” is, in substance, a shift away from
The shifting geopolitical tectonic plates of this year have placed Beijing in a profound strategic dilemma. As Chinese President Xi Jinping (習近平) prepares for a high-stakes summit with US President Donald Trump, the traditional power dynamics of the China-Japan-US triangle have been destabilized by the diplomatic success of Japanese Prime Minister Sanae Takaichi in Washington. For the Chinese leadership, the anxiety is two-fold: There is a visceral fear of being encircled by a hardened security alliance, and a secondary risk of being left in a vulnerable position by a transactional deal between Washington and Tokyo that might inadvertently empower Japan
After declaring Iran’s military “gone,” US President Donald Trump appealed to the UK, France, Japan and South Korea — as well as China, Iran’s strategic partner — to send minesweepers and naval forces to reopen the Strait of Hormuz. When allies balked, the request turned into a warning: NATO would face “a very bad” future if it refused. The prevailing wisdom is that Trump faces a credibility problem: having spent years insulting allies, he finds they would not rally when he needs them. That is true, but superficial, as though a structural collapse could be caused by wounded feelings. Something
RSS