Tensions Between China and Taiwan Pose Catastrophic Supply Chain Risk

By Logan Wamsley

A Supply Chain Risk Years in the Making

The eyes of the international community are now focused squarely on the relationship between China and Taiwan, highlighting a supply chain risk that could complicate an already strenuous year.

Earlier this week, one day after China celebrated the founding of the People’s Republic of China in 1949, the country significantly increased its presence in Taiwan’s air defense zone. China has been making such acts a daily occurrence for several years and are seen my many international entities as an act of aggression, but the succession of aircraft into the zone marks China’s largest move of its kind yet.

In two days alone, nearly 80 aircraft including fighter jets and bombers have been seen on Taiwan’s air defense systems, Fox News reports. According to the Taiwan government, although the aircraft did not formally enter Taiwan airspace, it did force Taiwan to scramble fighter jets in response. As of today, the numbers of aircraft has increased to nearly 150, says CNN.

These events are just the latest signs that China is rapidly escalating tensions between the two nations. Ever since Taiwan formerly broke from the country in 1949 and formed its own government, China has viewed Taiwan as a territory and has reacted harshly to any attempts to have the Taiwanese government recognized by the international community. Last week, China flew 24 jets into the air defense zone after Taiwan announced it would seek membership into a Pacific trade group just as China is applying.

The Impact

Such news is particularly concerning for the global supply chain, which in recent weeks has been under an unprecedented level of strain due to historic demand, limited supply due to COVID-19 restrictions, raw material shortages, geopolitical tensions and ill-timed natural disasters at critical supply chain pain points.

As of 2021, Taiwanese contract manufacturers account for over 60% of the outsourcing of semiconductors around the world, most of which is attributed to the Taiwan Semiconductor Manufacturing Co. (TSMC). Apple, Qualcomm, and Nvidia are all listed as critical clients of TSMC. Should this critical pain point be severed completely through acts of international aggression, the global consequences could be nothing short of catastrophic. And, should China ultimately acquire Taiwan’s semiconductor market share, it would then be solely responsible for over 90% of the world’s chip market.

Hedge Against Risk With Inventory Ownership Solutions

Supply chain solutions, more than at any points in history, are necessary to hedge against this critical supply chain risk in order to mitigate any sudden disruptions. Inventory Ownership Solutions, for example, focus on manufacturers securing their inventory now in order to guarantee businesses continuity for five, ten, or even 20 years without supply chain overdependence for the acquisition of critical inventory. Additionally, companies will be able to preserve working capital, improve cash flow, save on inventory carrying costs, avoid inflation issues, mitigate lead times, and much more.

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