Making Supply Chains More Resilient
The current global semiconductor shortage illustrates how geographic clustering of input suppliers can generate upheavals in the rest of the world. Business leaders and policymakers must think now about how to minimize the effects of future exogenous shocks on production networks and the global economy.
MUNICH – Automobile and electronics manufacturers worldwide have recently had to reduce output because a severe drought in Taiwan has hit the island’s production of semiconductors. This and other global supply-chain disruptions – many of them caused by the COVID-19 pandemic – have prompted advanced economies to take steps to mitigate the potential impact. But what types of government action make economic sense?