Supply Chain Management

The impact of globalisation on the electronic supply chain and its recent decline

Globalization or communication concept. Earth and luminous rays symbolizing network or airlines. 3d

Globalisation has bore the fruit of much of the modern era, but with tensions rising, how will its decline impact the electronic supply chain?

Globalisation has significantly shaped the electronic supply chain over the past few decades. By enabling the seamless movement of goods, services, and capital across international borders, globalisation facilitated the creation of a highly interconnected and efficient supply chain network. This global interdependence allowed companies to optimise production processes, reduce costs, and enhance innovation. However, recent years have witnessed a decline in globalisation, posing new challenges and uncertainties for the electronic supply chain.

The role of globalisation in the electronic supply chain

One of the primary benefits of globalisation has been the reduction of production costs. By outsourcing manufacturing to countries with lower labour costs, companies could produce electronic components more cheaply. This has been particularly evident in the semiconductor industry, where countries like China, Taiwan, and South Korea became central hubs for production.

Globalisation has also enabled companies to specialise in specific aspects of the production process, fostering innovation. For example, the design of cutting-edge microchips might take place in the United States, while the assembly could be carried out in Southeast Asia. This division of labour led to rapid technological advancements and a diverse range of electronic products.

The global supply chain was also able to become highly efficient due to advances in logistics, transportation, and communication technologies, fostered by globalisation. Just-in-time (JIT) manufacturing practices reduced inventory costs and improved responsiveness to market demands. Companies could quickly adapt to changes in consumer preferences and technological trends.

Finally, globalisation opened up countless new markets for electronic products. Companies could reach consumers worldwide, increasing sales and driving economies of scale. This expansion was particularly beneficial for tech giants, which gained significant market share across different regions.

Challenges of declining globalisation

  • Supply chain disruptions: The decline of globalisation has led to increased geopolitical tensions, trade wars, and protectionist policies. These factors have disrupted the smooth flow of goods across borders. For instance, the trade conflict between the United States and China resulted in tariffs on various electronic components, increasing costs and causing supply chain disruptions.
  • Increased costs: As countries adopt protectionist measures and impose tariffs, the cost advantages of globalisation diminish. Companies are forced to reconsider their supply chain strategies, potentially moving production closer to home or diversifying their supplier base. This localisation can lead to higher production costs and impact profit margins.
  • Supply chain complexity: The decline in globalisation has increased the complexity of supply chains. Companies need to navigate a more fragmented landscape with varying regulations, standards, and trade policies. This complexity can lead to inefficiencies, delays, and higher administrative costs.
  • Risk mitigation: The COVID-19 pandemic highlighted the vulnerabilities of global supply chains. Companies are now more focused on risk mitigation strategies, such as diversifying suppliers and increasing inventory levels. While these measures can enhance resilience, they also increase operational costs and require more sophisticated supply chain management.

Future outlook

The future of the electronic supply chain in a less globalised world will likely involve a mix of localisation and regionalisation. Companies may adopt a “China+1” strategy, seeking additional manufacturing locations to reduce dependence on a single country. Moreover, advancements in automation and digital technologies, such as AI and IoT, could help mitigate some of the challenges posed by declining globalisation.

Governments and industry stakeholders must collaborate to create a more resilient and adaptable supply chain. This could involve investing in local manufacturing capabilities, fostering innovation, and developing robust trade policies that balance economic interests with national security concerns.

In conclusion, while globalisation has profoundly impacted the electronic supply chain, its recent decline presents both challenges and opportunities. Companies must navigate this evolving landscape with strategic agility, embracing new technologies and diversification strategies to ensure a sustainable and resilient supply chain for the future.