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Fragmenting Supply Chains & the Rise of the Robots

Global Equities

BNP Paribas Asset Management
 

Key Takeaways

  • Global supply chains are fracturing and critical industries like electronics and healthcare will be centered in the future around two distinct US and China centric supply systems.
  • Capital deployment will revert to the west as production moves closer to end consumption.
  • Reshoring of production to the west will drive a large demand for automation technologies and digitization of manufacturing.
  • We have investments in several of the likely key beneficiaries of this long-term trend.

Disruption of Supply Chains and the Rise of the Robots

The period from China’s entry into the World Trade Organization (WTO) in 2001 until the Global Financial Crisis (GFC) in 2008 will be remembered as the period of peak globalization. The driver was the outsourcing of low value-added manufacturing to China and other emerging economies and optimization of supply chains and business processes. China’s share of global manufacturing value-added went from less than 10% to 25% while that of Europe, US and Japan declined significantly. It was the period of the great moderation and symbiotic growth between East and West. No other company than Apple better captures the zeitgeist of the era of globalization, outsourcing everything associated with low value- added and high capital requirement manufacturing to China and other low cost countries. In 2018, for instance, some 600 facilities were involved in one way or another in the production of Apple products, only 9% of Apple suppliers were based in the US and 70% located in Asia.

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