The last year has definitely been unlike any other: Coronavirus impacted on all our lives, disrupting them, but also causing major changes in different fields and industries. With hindsight there are probably ideas and solutions we never thought about that we now wish we had implemented earlier, think for example about the various possibilities offered by digital spaces for fashion shows or online classes and lectures.
It is as if our lives were divided in two parts that we could entitle "What we didn't know before the pandemic" (or maybe "what we chose to ignore"...) and "What we have learnt so far". Some examples of our pre and post-pandemic awareness? First and foremost supply shortages of face masks, gloves and PPE made us realise (well, we probably all knew it, but never really cared about it...) that most of these products are made in Asian countries.
For instance, basic surgical masks were very rare last year when the pandemic first broke in Italy and, when latex gloves became compulsory for a few weeks before Italy decided to turn to disinfectant gel, we suddenly realised that most gloves are made in Malaysia. The country boasts indeed the world's top latex glove maker that at the time and for obvious reasons didn't seem to be able to answer the overwhelming demand.
As noted in previous posts, in Italy some companies tried to answer the mask shortages by reconverting their industrial lines where possible (this was not so difficult for those industries producing sanitary towels). Even Fiat, the Italian automobile manufacturer, started producing masks for the Italian government. Their face masks were distributed for free to kids in Italian schools (a packet with 10 masks every two weeks; as you can see from the second image in this post, the package doesn't state manufactured by Fiat, but it shows the company's address, "FCA Italy S.p.A., Corso Giovanni Agnelli 200, Turin).
In 2020 March fashion and textile companies including Prada and the Miroglio Group were producing PPE and face masks, products that allowed them to remain open and keep their workforce in place when non-essential businesses had to shut down. By June 2020, most non-woven surgical face masks were made in Italy by a variety of companies and industries and were available at very affordable prices (as low as €0.50 cents per mask, a change compared to the prices of the last rare masks found in chemist's shops when the pandemic broke in Italy at the end of February 2020) .
But there is another market that provided experts with a wake-up call - the electronic components market. When Coronavirus hit, entire industries and factories closed down and many electronic manufacturers slowed down their production thinking that orders would have been cancelled or drastically reduced because of lockdowns.
Yet, while manufacturers were slowing down, the semiconductor industry got a push not from traditional markets and from its usual customers, but from other sectors - the health, medical and consumer industries. So, while at the beginning industry insiders thought there would have been a surplus stock of components, soon it became hard to meet the demand generated by these new markets on the lookout for high-end products for medical purposes, remote working, distance learning and home entertainment.
When it became clear that Coronavirus was a long-term issue, the initial uncertainties about the electroncs market actually turned in optimism. Yet soon there were new supply chain challenges: when traditional semiconductor customers turned production back on, they discovered the supplies of key components were not awaiting for them but had been sold to a new type of consumer. Unable to find the components needed, some companies, such as U.S. automakers and other manufacturers, were forced to cut production.
As over 80% of global chip production happens in Asia (but if you follow the production, testing and packaging of a specific part such as a chip for an automotive company you may end up taking a long trip from Italy to Korea, via Taiwan, Singapore and China...), it soon became clear that relying on suppliers in countries halfway around the world is not the best choice (consider that the cost of transports also went up with Coronavirus). So the wake-up call for many in the industry sector became a wake-up call for governments as well.
In February 2021, US President Joe Biden signed an Executive Order (EO) on America's Supply Chains, that initiated a 100-day process of reviewing and assessing the strengths and weaknesses of supply chains across four key industries - semiconductor chips, large-capacity batteries for electric vehicles, rare earth minerals and pharmaceuticals (the order also directed six areas of reviews - defense, public health, communications technology, transportation, energy and food production).
The US president's $2.3 trillion infrastructure plan also included calling for $50 billion for the chip industry.
It is estimated that in the next few years the passive component and the global single-board computer markets will significantly expand, so it is easy to understand why the country is currently focusing on this industry. Domestic manufacturing of next-generation semiconductor chips has also got a political implication in the case of the US as it is conceived as way to protect American supply chains from China.
That said chip plants are very expensive and challenging to set up as they have standards very similar to the ones from the pharmaceutical industry. Besides, investing ambitiously in manufacturing and researching domestically will imply other steps like reforming the US packaging industry. Therefore the rush for the semiconductors is likely to continue and shortages may still be the norm for the next 9 to 12 months.
So it is only natural to wonder if, after the lessons learnt from masks and semiconductors, other industries will be relaunched domestically as well. Sure, it is still more expensive to manufacture garments in Europe compared to having them made in China, Bangladesh, India or Vietnam, but you wonder if boosting the indigenous manufacturing capabilities of certain products may reboot the economy in countries like Italy. After all, it is never too late to capitalise on the key lessons learnt about supply chains in our rapidly changing global markets.
Comments