Chapter 14 The Resilience of the Indo-Pacific Supply Chain and Taiwan’s Role
In a globalized production system, countries provide their contributions at different stages of the product value chain due to the intra-sectoral specialization among nations resulting from comparative advantage. In the globalized production process, components and semi-finished products are manufactured in different countries, and it is no longer possible for an end-consumer product to be manufactured in only one country. As a result, supply chains often encounter problems such as delays in transportation (domestic and cross-border), delays in obtaining essential materials, or inability to obtain them again (e.g., spare suppliers and key suppliers from the same source or suppliers going out of business), and stock shortages, which often cause production line shutdowns, such as this year’s (2021) shutdown of major car factories due to a shortage of automotive chips. The U.S.-China trade dispute and the COVID-19 pandemic have not only deepened supply chain security issues, such as restrictions on the movement of workers due to city closures, forced factory shutdowns, and port congestion, resulting in supply chain disruptions. Strengthening supply chain resilience is one of the hottest topics for 2020 and beyond.
With 60% of the world’s Gross Domestic Product (GDP) and a large young population, the Indo-Pacific region has become an important strategic area for the U.S. and its allies to counter China under the confrontation between the U.S. and China. In the face of the global supply chain restructuring, Taiwanese companies have not only relocated their production bases in China back to Taiwan due to the “order-transfer effect”, but moved some of their production lines to Southeast Asia and India. The increase in the number of Taiwanese companies investing in the Indo-Pacific region has affected the overall layout of Taiwan’s industrial supply chain and led to a reshuffling of the global supply chain, the importance of which should not be underestimated. This article analyzes the reasons for the changes in the supply chain in the Indo-Pacific region, the current situation, and the possible areas for Taiwan companies to focus on in the future.