Semiconductors in short supply, war in Ukraine, lockdowns in China – the hoped-for economic recovery this year will probably not materialise. Instead, there is a risk of new delivery failures and rising costs.
If high-level politicians feel compelled to call for the protection of free and open world markets, then globalization must be in a bad way.
In view of the problems with deliveries from Asia and because of the Ukraine war, the economic and political elite are again discussing the risks of being too dependent on certain suppliers. At first, electronic chips were hard to come by. Currently, energy prices are skyrocketing and a food crisis is imminent.
At the meeting of the World Economic Forum in Davos, leading politicians such as Federal Economics Minister Robert Habeck left no doubt that turning away from globalization would not solve the problems. But the rules would have to change to become more resilient, says the Green politician.
German industry suffers from situation
Russia’s invasion of Ukraine has rapidly exacerbated the problems that have been evident for the past few years. German industry lacks parts from Eastern Europe and the intervention of the Beijing leadership in the fight against corona weighs heavily. No wonder companies are wondering whether things can go on like this.
“Will the world be the same for business in the future? Definitely not in the energy sector,” says Jean-Marc Ollagnier. He is the European head of the consulting giant Accenture. “And even with food – with everything that comes in the next few months – nobody believes that everything will go back to the way it was.” The European economy lost at least a year as a result of the war.
“A massive problem is also rolling towards us from China in the next six to nine months because of the lockdowns and lack of industrial production,” says Ollagnier.
“To be honest, the situation in China with the lockdowns is currently the biggest challenge because it has a huge impact on transport,” says Andrea Fuder, head of purchasing at the Swedish truck and construction machinery manufacturer Volvo. “And that in a system that is super fragile, which is why every disruption gets through to us.” In the past, this was always buffered by stocks. But they are low at the moment. Chips are also missing in the production of trucks at Volvo.
Historic delivery crisis
For the board member, the situation is a kind of historic delivery crisis. “And I really hope that’s not the new normal,” adds the manager, who has been in the industry for 30 years. In Germany, the company builds construction machinery in Hamelin, Lower Saxony, and near Trier.
At the moment the situation is still reasonably orderly, says Volkswagen boss Herbert Diess in an interview with the US business broadcaster CNBC. Demand from customers is decent, and many sectors in Germany still have a well-filled order book. “What happens in the medium term, we must first digest what is currently happening with the war and with the supply chains,” says the boss of Europe’s largest car manufacturer. However, the problems could also drive the restructuring of the economy towards digitization and climate change.
New debate about supply chains
So where is the journey going? But more local production and less global trade? Christina Raab, Accenture boss for Germany, Austria and Switzerland, sees at least considerations in this direction in the boardrooms. “In business, discussions about supply chains have changed completely because nobody assumes that we will return to some kind of pre-corona state,” she says.
“In the medium term, many companies are looking at whether they shouldn’t at least have regional supply chains and regional production, which may be more stable in crises, as an option,” says the expert. “In order to be competitive, a lot has to be invested in automation, of course.” This is necessary anyway given the shortage of manpower.
“One of the reasons why company bosses are increasingly thinking about local production for local markets is that the supply chains for container shipping are slow, as you can see today,” says Raab. Companies are also examining how the shortage of raw materials can be counteracted. “That’s exactly where the so-called circularity comes in: when raw materials are scarce, it’s better to keep them in the cycle through recycling and new uses.”
Volvo manager Fuder sees the concentration of the industry in Asia as a problem, especially with semiconductors. “We must learn to prevent monopolistic central structures for some key technologies.”
Naturally, Intel boss Pat Gelsinger sees it that way too. Western economies should be able to secure their supplies themselves again. That also applies to the chip industry. The US giant also manufactures semiconductors in its own factories and does not only have them manufactured in Asia like many in the industry. In Magdeburg, the group wants to invest many billions in new plants with government funding. Instead of predominantly coming from Asia, half of the chips are to come from western countries in the future.
Just getting parts around the church tower is not the solution, says Fuder. This would also have undesirable effects on emerging and developing countries. Europe has hardly any raw materials anyway, so it is dependent on supplies. The economy must improve, among other things, in recycling and the further use of materials.
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
