Slowdown: rethinking the global supply chain

Most companies will need to find multiple geographic options to replicate the scale of, say, China, which for some industries is not realistic in the short to medium term, while determining whether they actually reduce geopolitical risk. while performing the movements. They also face execution risks, including lack of necessary infrastructure such as labor and logistics in new locations, maintaining supply from old sources during transition, and competitive disadvantages. potential if competitors do not change their approaches.

While the time needed to revamp supply chains varies by industry, most Morgan Stanley analysts expect three to five years for conversion. For semiconductors, however, it could take 10 years or more, mainly due to the lack of skilled labor concentrated outside of Taiwan.

Indeed, the transition is likely to weigh more heavily on certain sectors. Due to supply chain bottlenecks in recent years, analysts have flagged semiconductors, technology hardware, machinery and automotive as sectors where supply chain realignment needs to occur. happen the fastest.

“Sectors we are watching that could benefit from supply chain realignment spending include semiconductor capital goods, automation, cleantech, defense and cybersecurity, industrial gases, capital goods, metals and mining,” notes Zezas.

Others could see their profits under pressure as they have to devote more capital to securing supply chains, including semi-finished products (especially commodities), European chemicals, gas utilities natural midstream and downstream in Europe and Asia, automotive original equipment manufacturers and certain parts, and leisure and transportation.

And while discussions for businesses in the United States and Europe focus on decreasing reliance on China, especially for goods, services and production, Zezas and his team say the Investors shouldn’t rule out potential superpower benefits as the forces behind the downturn continue to unfold.

“We see the transition to a multipolar world creating opportunities in parts of the Chinese economy and stock market – with an industrial policy aimed at increasing self-sufficiency in areas such as raw materials, new energy materials, semiconductors and capital markets.”

For more information from Morgan Stanley Research on the outlook for global e-commerce, ask your Morgan Stanley representative or Financial Advisor for full reports, “’Slowbalization’ and Supply Chain Opportunities (May 23, 2022) and “Navigating ‘Slowbalization’ & the Multipolar World” (May 18, 2022). And more insights from Morgan Stanley thought leaders.

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