Disconnected ICT Supply Chains: New Power Plays Unfolding written by Digitimes founder and president Colley Hwang has been greeted with overwhelming enthusiasm after its original Chinese edition was published in May 2020. The Chinese edition has had three printings within a little over two months. It is the only book in Taiwan and possibly in the whole world that takes an in-depth look into current global supply chain developments and offers the industry insights into the implications of the COVID-19 pandemic and US-China trade tension.
At the request of readers, Digitimes recently organized a series of book reading events where participants could share feedback on the book and views on industry dynamics. The series of events also presented a glimpse into the thinking and practices of different industries amid the current market changes.
At one of the book reading events, Hwang stressed he wrote the book out of a sense of social responsibility as a veteran industry analyst in Taiwan. He noted that the high-tech industry is a critical growth driver of the global economy so there is a wealth of in-depth high-tech market research. As Taiwan's high-tech sectors including semiconductor, PC and notebook manufacturing, play a pivotal role in the global supply chain, no one else in the world knows supply chain dynamics better than Taiwanese. With COVID-19 disrupting the global supply chain, the whole world is eager to figure out what is happening and what is lying ahead. Digitimes, as the global IT industry's only source of information about Taiwan's high-tech sectors, feels obligated to voice Taiwan's views to the rest of the world. This is also why Digitimes has made Hwang's book available also in English.
Agreeing with Hwang, the host of the booking reading event, Frank Yeh, CEO of WPG Holdings, stated Taiwan-based firms have long focused on manufacturing and sales pitching while paying little attention to brand building. Going forward into the new era, Taiwan-based firms should begin efforts to strength brand building. The thinking is also what drives WPG to work with Digitimes to publish news releases in English, allowing global vendors to gain further insight into WPG's digital "blue ocean" strategies for the next decade.
On top of strengthening brand building, Taiwan-based firms also need to unshackle themselves from old thinking and map out new operation strategies in the face of the current challenges in 2020. The participants at the event uniformly consider COVID-19 and US-China trade tension the two major factors dictating the global changes in 2020.
First of all, COVID-19 has infected 17 million people worldwide with the death toll coming close to 700,000 as of the end of July. All participants in the event agreed that it is an unprecedented crisis to every firm, and businesses were in chaos in early 2020. Nevertheless, six months into the crisis, businesses are now more or less certain about the changes brought by the pandemic.
With governments around the world implementing lockdowns, shipping costs are rapidly on the rise. Usual sea and air freight rates no longer apply, so transportation costs have to be recalculated. As transportation costs affect inventory costs as well, vendors generally keep a minimum inventory level. However, during the COVID-19 outbreak, most vendors ran out of stock and had difficulty getting supply from the market, leaving them with no choice but to shut down production or operation. As such, most participants think keeping a high inventory level will be an essential strategy for manufacturers going forward.
Each industry sector has been impacted by COVID-19 in a different way depending on its characteristics. For example, food service and entertainment industries were mandated to shut down business with governments taking measures to control COVID-19 infections and thus they were the most seriously hit. Network communication and healthcare sectors were able to buck the trend during the pandemic and show growth. As firms try to keep business running while preventing COVID-19 from spreading, work-from-home (WFH) and remote monitoring have become critical means to maintain uninterrupted operation, which is not possible without network communication technologies. Healthcare becomes the most vital industry on the front line safeguarding human lives against COVID-19. In handling a large influx of patients during the pandemic, medical professionals have realized the importance of smart systems, so the smart healthcare sector will see rapid growth in the years to come.
It remains uncertain when COVID-19 vaccines will be available, so the industries are expected to continuingly experience the changes mentioned above, which may even become the "new normal." However, the participants also noted despite its detrimental effects, COVID-19 will pass sooner or later, unlike the consequences of the US-China trade war that began in 2018.
In view of the recent clashes between the US and China, the global industry is definitely moving toward the G2 framework. Going forward, vendors will operate on two systems – one for China and one for the rest of the world. Then, the challenge is how to allocate resources to run the two systems in parallel. How does Taiwan appeal to the global industry with its unique value? Hwang advised business leaders present at the event that Taiwan needs to develop a new market other than the US and China so that firms have a third strategic focus. ASEAN member states including the Philippines and Vietnam, as well as India look like good choices for now. He also pointed out that for their efforts toward ASEAN markets to generate results, Taiwan-based firms must understand and respect the characteristics of Southeast and South Asian countries as they are quite different from the US and China in cultural, industrial and political perspectives.
In conclusion, Yeh gave the participants three words as takeaways from the event: reset, reimagine and relearn. He encouraged business leaders to go back to the drawing board, dare to dream big and learn from the future. He said businesses like to talk about the "blue ocean" but in fact there is no blue-ocean market but only blue-ocean strategy. In the face of COVID-19 and the US-China trade tension, Taiwan-based firms have to focus on building customer relationships and bring higher values to customers through differentiating products and services, so as to create win-win or even multi-win situations. By doing so, the Taiwan industry will find a new path to success.
Colley Hwang, Digitimes founder & president (left) and Frank Yeh, CEO of WPG Holding (right)
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