Manufacturing shortens the supply chain
A new round of intelligent, green, and service-oriented transformation and development, the domestic division of labor in developed economies has been accelerated. Deepening, the length of global value chain production (GVC) showed signs of "shortening". The recent trade disputes between China and the United States have forced multinational companies to rethink their global layout strategies, from accelerating production "globalization" to "localization" or "regionalization" of the global value chain transformation.
In fact, in recent years, the new economies dominated by mainland China have developed rapidly. They have implemented import substitution policies and changed intermediate products to domestic production. The domestic value chain has lengthened. The upgrade of these new economies in the global value chain may be Lead to a reduction in cross-border activities.
According to data from the World Bank, after the global financial turmoil in 2008, global intermediate products (Intermediate Products Trade) activities began to shrink, and in the six years after the crisis, the economic recovery also showed a slowing trend. From the perspective of at least two or more cross-border complex GVC activities, after 2012, the growth of complex GVC has slowed down, and the number of cross-border activities for "production" has also declined.
In addition to the substitution of imports in emerging countries, allowing more intermediate materials to be produced in their home countries; in recent years, developed countries such as the United States, Germany, Japan, South Korea, and the United Kingdom have also actively promoted the return of manufacturing industries, and new materials, 3D printing, The rapid penetration of technological innovations such as smart manufacturing has also deepened the division of labor in its domestic production chain.
According to survey data from American AT Kearney, Boston BCG, Italian Uni-CLUB MoRe backflow research group, and American Reshoring Initiative, since 2010, many international companies have considered shortening delivery time and reducing total costs (such as labor, energy costs), the length of the supply chain, the improvement of quality, the reduction of freight, wages, and the improvement of customer experience, etc., began to launch the "return" strategy to transfer the production line back to its home country for production.
The main return industries include electronic equipment, home appliances, and parts manufacturing, transportation equipment, metal manufacturing, and furniture. 59% of the origin of return activities came from the mainland, and 13% came from other Asian countries. Take American companies as an example, including Whirlpool, General Motors, Ford Motor, etc., and the number of back flows of American companies continues to increase.
The friction caused by the China-US trade dispute continues to expand. The range of products subject to tax increases extends from high-end manufacturing, machinery, and equipment, to low-end manufactured goods and consumer goods. The economies involved have also spread to Japan, South Korea, Taiwan, and other European countries, and affect The development of the global supply chain has become one of the drivers of the "short-chain revolution".
Since the mainland is a global manufacturing center, most of the products exported to the United States come from foreign investment and joint ventures invested and produced locally. Taking the 2016 ranking of the top 100 high-tech products exporting companies to the United States in 2016, 70 of them became foreign-funded companies, and Taiwanese companies accounted for about 40%, including Foxconn, Quanta, Compal, etc. If the U.S. proposes the first round of product sanctions against China, the domestic surcharge from the mainland accounts for only about 25% of China’s exports to the U.S. Most of the multinational companies that have been impacted in this wave first use "adjusting production capacity" as a short-term response. However, focusing on factors such as mainland labor costs, corporate environmental protection requirements, and the continued spread of trade protectionism, some international companies have begun to produce The base is gradually or partially moved to other countries, changing the current supply chain system.
Due to the integration of innovative technologies such as intelligence, systematization, and artificial intelligence (AI), the conditions for establishing production bases have greatly increased flexibility. Therefore, choosing a "localized" or "regionalized" production layout close to the market will form a larger competitive niche for manufacturers. In the past, the "bullwhip effect" formed by the division of labor in the supply chain due to globalization, once turned into a "short-chain", the risk of errors in the intermediate links will also be reduced.
The return of the manufacturing industry, the technological innovation led by the new round of industrial revolution, has transformed the global industry towards digitization. It is expected that while reshaping the traditional economic form, it will also deepen the domestic division of labor in these countries and impact the current global industrial supply chain model. Affecting the shortening of global supply chains in the future, and the major black swan incident in the China-US trade war has further increased the possibility of short chains.
Taiwan is an export-oriented small and medium-sized economy, highly dependent on international economic and trade development and industrial chains, and is a high participant in the global value chain. In the face of rapid and substantial changes in the international situation, while seeking to expand exports and increase the added value of exports, it is also necessary to think about how to build a stronger industrial chain through industrial structure adjustment and international market layout strategies to improve the overall industry’s ability to withstand external shocks.