Shifting supply chains: redefining strategies for success in Japan

By Rodrigo González, Tokyo director

Against the backdrop of the covid-19 pandemic, major geopolitical events, such as the war in Ukraine and US-China tensions, have created great uncertainty for businesses and their supply chains. In response to the resulting supply disruptions, and in anticipation of a slowdown in trading activity in 2023, businesses have been focused on enhancing their resilience for the longer term and insulating themselves from future shocks.

On 12 July 2023, Corporate Network’s Tokyo chapter hosted an event in which EIU’s chief economist and editorial director examined the key trends that were forcing organisations to rethink their supply chain strategy. As Dr Baptist explained, since this spring, Chinese officials have searched the offices of consultancies Capvision and Bain and have even detained employees from Mintz, an American due-diligence firm, and Astellas, a Japanese pharmaceutical company. This has prompted an unprecedented capital outflow from China, estimated at $755 billion in 2023 by EIU.

While other emerging economies, such as Vietnam and increasingly India, are attracting significant foreign capital and driving the relocation of critical manufacturing, such as electronics and pharmaceuticals, Japan still offers important economic and political advantages that may entice some companies, especially Western firms, to invest more heavily in the country.

For Dr Baptist’s full presentation from this meeting, please click on the button below.

Following his presentation, EICN members were treated to an insightful panel discussion between Dr Baptist, as well as EICN members Mr. Ikuya Kawasaki – President of Infineon Technologies Japan G.K., and Mr. Ben Simpfendorfer, Partner at Oliver Wyman, a Marsh McLennan Group Company.

For those who could not make it, here are some key takeaways from the discussion:

  • Geopolitics, not geographical proximity, is the key driver of supply chain shifts. Nevertheless, the sheer size of China’s domestic market, and the country’s competitive advantages perfected over years of high economic growth, render China a necessary partner for years to come.
  • On the other hand, global firms are implementing different strategies to reduce their exposure to China. The main reason behind it is strengthening corporate resilience, although other factors like rising labor costs in China also encourage firms to look elsewhere for production.
  • Japan is showing tremendous resolve to put itself back in the race for semiconductors. TSMC’s new facility being built in Kumamoto and the recent announcement by JIC of acquiring a private chip maker for $6.4 billion, are welcome news to industry experts. Yet, only a long-term commitment by the government will allow the country to compete with the titans in Taiwan and South Korea.