Supply Chains: Don’t Ignore 2024 Geopolitical Risks

By Logan Wamsley

In many regards, the current state of the electronic component and semiconductor market is quite positive. According to ECIA’s Electronic Component Sales Trend (ECST) released in March, for example, February saw overall electronic component sales move into positive territory for the first time in 21 months on the back of momentum from interconnected, passive, and electromechanical (IP&E) devices. The trend continued into March, with nearly all major electronic segments surpassing the 100-point threshold that indicates positive growth. However, just because current news is positive does not mean the market — or the manufacturers purchasing within it — should become complacent. The largest reason: continued geopolitical tensions.

This point was made clear in a recent speech by India’s Secretary, Union Ministry of Electronics and Information Technology, S. Krishnan. The lecture, titled “Building Economic Resilience Through Technology,” was given at the Madras School of Economics and organized by the Southern India Chamber of Commerce and Industry (SICCI). “The dynamics of geopolitics again is something that needs no explanation,” said Krishnann. “We need to ensure that there are supply chains that are resilient. We need to ensure that geopolitical issues do not append the economy suddenly.”

The clearest example of today’s geopolitics at work revolves around the tensions among Taiwan, China, and the United States, which has to date has publicly aligned itself with Taiwan. According to CrowdStrike co-founder and acclaimed national security analyst Dmitri Alpervitch, the U.S. currently finds itself in a “Cold War” with China on multiple fronts: space, AI, and, critically as it relates to Taiwan, semiconductors.

Most recently, China has also responded to the bill signed by President Biden that effectively bans Tik Tok in the U.S. unless the app is sold away from parent company ByteDance. The bill also included foreign aid to Taiwan.

“China firmly rejects the U.S. passing and signing into law the military aid package containing negative content on China,” said Chinese Foreign Ministry spokesperson Lin Jian responding to the law. “We have lodged serious representations to the U.S.”

Another bellwether of the current state of affairs recently came from Taiwan’s King Yuan Electronics Co. (KYEC), one of the world’s largest semiconductor testing and packaging services firms. In April, KYEC’s board of directors announced that they would be withdrawing from mainland China’s semiconductor manufacturing landscape. Companies like Foxconn, Intel, and the Taiwan Semiconductor Manufacturing Co. have also announced plans to expand into other markets in the face of such tensions.

Even in the wake of positive market conditions, it is warning signs such as these large-scale supply chains must consider when developing long-term sourcing strategies. For more information on how to insulate your supply chain from geopolitical risk, check out Partstat’s innovative Inventory Ownership Solution.