There has been a piece of news that is circulating in China’s cyberspace recently. It is about a document from the Shanghai Municipal Commission of Economy and Information Technology, which had earlier sent a letter to the Sichuan authorities asking the province to give priority to fulfill the basic electricity demand of 16 local parts manufacturers that supply to Tesla and Chinese automaker SAIC. This is to ensure the stability of the automakers’ supply chain. The Shanghai government department is said to have also admitted that, "Tesla and SAIC have recently raised their concerns to us that their major auto parts suppliers are affected by partial power cuts in Sichuan, which will affect their vehicle assembly".
China is a geographically huge country with global importance. Hence, when some problems occur in certain areas, they will pass through the industrial chain and affect not only the country itself but also the stability of the world economy. Sichuan, for example, has a large number of auto parts suppliers. Now, its power grid has been overwhelmed as the province suffered its worst heatwave in 60 years. With temperatures exceeding 40 degrees Celsius (104 degrees Fahrenheit), the province has begun restricting power supplies to homes, offices, and shopping malls. As a result, even the world’s foremost new energy vehicle industry giant is inevitably severely affected. This is a problem brought about by de-globalization, that is, the global operation of multinational companies will no longer be possible in the future to design their own global productivity layout under the assumption of an ideal business environment.
The supply chain seems to be the main problem in the current risk exposure of multinational production, but the problem does not stop there. The risk factors created by de-globalization are far beyond the basic understanding of multinational companies. The predicament that Tesla has encountered today will definitely appear in almost all multinational companies, in a more serious situation than imagined, especially those engaged in system manufacturing,
The industrial situation of various countries has obviously undergone some unexpected and major changes in recent times. These include: 1. There are more and more systematic manufacturing processes, where the production and manufacturing of independent end products are decreasing day by day, which requires a higher level of mass support. 2. The level of technological monopoly has risen. Even the common bicycle production is now facing restrictions due to the monopoly of transmission manufacturing. In fact, transmission manufacturing is mainly controlled by two companies. As for the production of semiconductors, in addition to the absolute monopoly of the lithography machine, there are actually more technological monopolies, such as the photoresist liquid used for exposure. Globally, this is mainly monopolized by two companies in the United States and Japan. 3. The cost of shipping is rising. This involves the increasingly expensive cost of human resources, the threat of war and conflict, and rising port and canal tolls. The impact of world spatial distance on costs has never been greater than it is today. Not long ago, Ford Motor Company announced that due to rising costs, the company will face additional expenses of USD 3 billion. For that reason, it had to lay off 3,000 people.
Looking at the cost factors of these world markets as a whole, it can be discerned that they are all related to space. Today, the production mode of multinational corporations is increasingly manifested as a spatial one. Transnational production has evolved from a pure corporate behavior to a spatial production behavior subject to complex spatial factors. Among them, the geopolitical cost of transactions has risen sharply. The cost changes caused by spatial conflicts and contradictions have resulted in geopolitics becoming a risk factor that needs to be constantly adjusted. This has further driven and even determined the changes in the total cost.
To resolve this issue, it may be inevitable to introduce the close production mode. The so-called close production mode refers to the deployment of major spare parts industries in the central market and around the productivity center to form a production system that is as close as possible. This includes two levels, the spatial level, and the social environment level. What should be selected is the spatial area with as few conflicts and contradictions as possible to deploy and organize production.
Such a structural adjustment will certainly have a great impact, but de-globalization itself is not cost-free. This inevitably means there will be some major effects to it, the difference is only a matter of form, time, and where.
About 350,000 jobs are expected to return to the U.S. this year, according to a report by the Reshoring Initiative, an organization that pushes manufacturing back to the U.S., as American companies now relocate. This figure is far higher than last year's 265,000, the highest since 2010 when tracking the data began. The report shows that in 2010, only 6,000 jobs returned to the U.S. from abroad, and the number of jobs expected to return in 2022 will be more than 50 times that of 2010.
It is worth noting that according to their survey, just in the past month of this year, dozens of companies have said that they plan to add factories or new production lines in the U.S., including computer memory and data storage giant Micron Technology which will invest USD 40 billion in Iowa to expand production lines. Meanwhile, Ascend Elements will spend USD 1 billion to build a lithium-ion battery material plant in Kentucky. On the other hand, SK Group is preparing to invest USD 22 billion in Kentucky and Tennessee for the construction of packaging facilities, electric vehicle charging systems, green hydrogen manufacturing, and other plans.
The corporate world is taking action now, maybe they just lack a clear concept.
