HKUST Li & Fung Supply Chain Institute predicts future trends of global supply chains
Insights from apparel, EV, medical device and solar panel industries
Shanghai, 9 November 2024 – Today, HKUST Li & Fung Supply Chain Institute (“the Institute”) released the Global Supply Chain Report 2024 at the 7th China International Import Expo (CIIE) in Shanghai. The report investigates the global supply chain landscape in four industries - apparel, electric vehicle (EV), medical device and solar panel, in order to gain insights into the major factors shaping the future of global supply chains and identify future trends in global supply chains landscape.
Ka-Mun Chang, Executive Director of the Institute said, “In an era marked by geopolitical tensions and accelerating technological shifts, the Global Supply Chain Report 2024 presents our latest thinkings on how to mitigate risks and ride on emerging opportunities to navigate the unprecedented challenges posed to the global supply chains, which we believe will inspire new ideas for industry development.”
The report identifies major political, economic, social, environmental, and technological forces that are driving significant transformations along the global supply chains. These changes are not only impacting how businesses operate but also influencing the strategic decisions they make to stay competitive and resilient.
China’s pivotal and evolving role in global supply chains
According to the report, China will continue to be a key player in global supply chains given its cemented position as the world’s manufacturing powerhouse. “China's strengths in manufacturing such as skilled labour and extensive supplier networks make it difficult for companies to completely move away from China in the foreseeable future. On the other hand, Chinese manufacturers are changing its role and moving upstream along the global value chains, transforming from “direct suppliers” to overseas markets to “suppliers of key materials and components” to other production countries. Chinese companies have also become prominent investors in overseas manufacturing, orchestrating supply chains globally.”, said Helen Chin, Head of Research of the Institute. “Besides, Chinese manufacturers are transforming to innovators of technologies. For instance, with increased R&D investments, government support, market acumen and entrepreneurial vigour, Chinese medical device companies are developing innovative medical technologies and becoming more competitive in the international market, closing the gaps with leaders like American and German companies.” Meanwhile, coupled with the escalating geopolitics tensions among countries, the diversification of production bases to areas such as Southeast and South Asia will continue. For example, in the highly cost-driven apparel industry, businesses continue to diversify away from China to Southeast and South Asia, with supply chain managers seeking to circumvent the additional tariffs and duties and secure their supply chains amid the US-China trade war and regional conflicts.
Onshoring to US and EU will accelerate on the back of government policies
On the other side of the world, the US and EU are increasingly promoting domestic production to reduce dependency on imports and enhance supply chain resilience. Supportive domestic policies play a significant role in encouraging the onshore development of specific industries within a country. In the EV sector, countries are striving to establish self-reliant EV ecosystems, with policies such as the US Inflation Reduction Act (IRA) and the EU’s Critical Raw Materials Act aimed at reducing dependency on China. The IRA provides substantial incentives to build and expand EV production facilities in the US, including grants and loans aimed at boosting domestic battery manufacturing and supply chain resilience. The EU’s Critical Raw Materials Act aims to reduce the region’s dependency on imports from single country suppliers for critical raw materials for EU’s industrial production.
India as the rising player
The report also points out that India is rising in global supply chains. India has been establishing itself as a significant player in global supply chains, in both traditional industries like apparel and emerging sectors like EV, medical device and solar panel. The country is enhancing its manufacturing capabilities and benefiting from its large labour force and government incentives aimed at boosting production and exports.
A report sharing session was arranged at the CIIE today and audiences from various sectors attended the session. The summary of the report is now available for public review