July 22, 2024
Supply chain stories for this week…
1: EV tariffs could backfire warn EU auto leaders
Summary: Tariffs could upend the market, cause EU market share in China to drop, and affect the long-term health of automakers.
Analysis: Chinese consumers have been shifting to EVs for the last five years, I.C.E.s are a sunset industry. Add to this geopolitics and the situation could turn out poorly for EU automakers, who rely on China for upwards of 30% of their profits. Any hit against Chinese autos will be felt in Europe either through a decline in Chinese market share, or reciprocal actions by the Chinese government.
2: US official says Chinese "seizure" of TSMC in TW would be devastating
Summary: Secretary Raimondo stated that a Chinese invasion of TW and seizure of chip-making capacity would be "absolutely devastating" for the US.
Analysis: Yes, it would, but the likelihood is in the low single digits. A bigger long-term issue is if Taiwan runs out of water.
3: Banned Chinese cotton found in 1 out of 5 retailers’ merchandise
Summary: Researchers analyzed small clothing samples and determined that 19% of US and global retailers’ clothing has banned cotton from China.
Analysis: This is misleading as the sample size was small, especially when compared with the overall volume. The other issue is full traceability. A clothing maker rarely, if ever, knows where the raw material of its product comes from. With this, almost all of the cotton in China is used inside of China (90%+), and the cotton that does leave the country is often used in things such as gun-cotton, which is used to make bullets, and artillery shells that Rheinmetall, a German weapons manufacturer, uses.
4: How US Industrial policy can take learning from China
Summary: A good overview of some of the challenges with US industrial policy, and what it can learn from Chinese industrial policy to improve.
Analysis: Chinese industrial policy, even with its flaws, is world-class in lining up the various vested interests towards unified goals. This is something the West struggles in aligning the various interests needed in moving industry forward.
5: Airbus shares fall 10% due to supply chain worries
Summary: Supply chain issues are creating headaches for Airbus as it is a drag on the company’s profits and margins.
Analysis: Many products are in short supply including engines and cabin parts. Add to this rising logistics costs and political uncertainty and there is pressure building on margins an profitability. Expect this trend to continue over the next several years.
Something unique…
How is the four-day workweek going for two companies? Two companies are trying out a four-day workweek. the claim is workers are already working from home one or more days of the week, and efficiency is improved when workers can focus on a 4-day, instead of a 5-day, week.