Two Companies Will Guide Global Supply Chains

A splintering of global supply chains, driven by both political and business considerations, has hundreds of manufacturers and logistics providers debating where to go next. They’d be well advised to take their cues from two Taiwanese companies who’ve led the charge.

Taiwan Semiconductor Manufacturing Co. is the world’s largest maker of chips, with clients including Apple Inc., Nvidia Corp. and Advanced Micro Devices Inc. Foxconn Technology Group, whose flagship is Taipei-based Hon Hai Precision Industry Co., assembles those components into end devices. Apple’s iPhones and Nvidia’s artificial intelligence servers are among the most famous of Foxconn’s products, but its reach extends into industrial sectors including Tesla Inc. cars, factory-automation systems provider Siemens AG and even an Israeli satellite maker.

Their size, technical dominance and global influence make these two Taiwanese companies irreplaceable — no other single business could jump in to fill the gap should either disappear overnight. That’s the concern policymakers from Washington to Canberra have in the event tensions between Taipei and Beijing escalate to the point of military conflict. But both firms are thinking less about war and more about how globalization can extend their lead.

“Instability in the Taiwan Strait is definitely one supply chain-resilience consideration,” TSMC Chairman and Chief Executive Officer C.C. Wei said after its annual shareholder meeting this month. Yet the chipmaker also seen benefits from globalization “because we can get the best from around the world.”

Foxconn has also been touting the upside of its expanded reach. “Our diversified global footprint is an important part of Hon Hai’s competitive advantage,” CEO Young Liu told shareholders recently, noting that it has 205 sites in 24 countries. “In the current geopolitical situation, that advantage is even more important and obvious.”

Two decades after joining the World Trade Organization, China’s position as factory to the world has shifted from being a win-win for clients and suppliers to a massive risk. Labor shortages, rising costs and stiff local competition have many looking elsewhere. Japanese and South Korean carmakers are withdrawing, US power-tool maker Stanley Black & Decker shut its factory, and Nike Inc. has moved away.