How supply chains hinge on Asia

David Pilling

Financial Times

“It takes a crisis” to reveal how much our vulnerable global supply chain depends on Asia, said David Pilling. When the Japanese earthquake struck, in March, “even most Japanese were unaware” that a single hard-hit factory there produced 40 percent of the world’s microcontrollers, which most new cars need to run. Now flooding in Thailand has shut down factories for such companies as Toyota and Toshiba. For complex products like the iPhone, any disruption in the supply of a single, tiny component can wreak havoc on the whole “tangled chain.” And “almost nothing could be made these days without Asian parts,” which worries technology giants like Apple.

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The barriers to entry in specialized manufacturing are high, and it has already become “very hard for U.S. or European manufacturers to claw back” that capacity from their Asian counterparts. Some major Asian suppliers clearly aspire to do more, like “invent the next breakthrough device.” By relying on Asian companies for the insides of “everything we use,” we risk today’s suppliers becoming tomorrow’s competitors.