"Non-Red Supply Chain" Will Crush Industries to Death

 "Non-Red Supply Chain" Will Crush Industries to Death

China Times Editorial (Taipei, Taiwan)

May 27, 2019

 Translation of an Excerpt

In coping with the expanded US-China trade war, there is a trend for Taiwan businessmen on the Mainland to return home; Kung Ming-hsin, Minister of State without Portfolio, proposed the idea of ​​"setting up a non-red supply chain." However, it is not easy for this idea to reach its goal; if the government highhandedly forces its implementation, it would place Taiwan's industries in peril. The government should not decide its policy with one roll of the dice; it should maintain flexibility, allowing firms to make choices based on their own judgments and niches. The best strategy is to take the best of both worlds, making as many friends as possible and dispersing the risks.

The "red supply chain" refers to the fact that in the last dozen years or so, with the rise of Mainland industries, many parts and components that used to be imported or supplied by foreign manufacturers have gradually been replaced by products of Mainland enterprises. And that the Mainland has been able to successfully develop, in a short period of time, the so-called red supply chain, in addition to such factors as human resources and policy support, there is also a very crucial factor of success: the Mainland itself has massive market demand, creating the self-confidence to underpin the domestic development of the supply chain. Thus, in many industries, people have witnessed the Mainland’s approach of using the market to gear up industries, developing its own technology and industries.

Even though we are encountering the US-China trade war, we should never overlook the fact that the US market is absolutely not the only market for the Mainland; the Mainland itself is a gigantic and ever-growing market. From demand for semiconductors to automobiles, LCD screens, mobile phones, notebook computers, their sales all occupy #1 in the world, not to mention that the US market represents 20% of the Mainland’s exports, and the Mainland still has the huge export market of 80%. Let us ask, is it possible for Taiwan industries to jettison all these to create its own "non-red supply chains"?

We recommend to the Tsai government: it is enough to build a good investment environment for Taiwan businessmen on the Mainland to return home, and not necessary to create other problems. As to how industries will cope with the trade war in the future, industries will, based on their own requirements, make choices conforming to their niches; there is no need for the government to offer a ten-galloon hat policy of “creating a non-red supply chain” to the industries. Frankly speaking, the best strategy for an industry is to not take sides, not place bets, do business where opportunities exist, and maintain good relations with the Mainland and the United States. For instance, Taiwan Semiconductor Manufacturing Company (TSMC) has decided to continue shipments to Huawei after the US announced its blacklisting.

Taiwan should maintain neutrality in the trade war, observing international law and contracts, and never place its bets on one side.

Attachment : none