[COVID-19 Transformation] 74% of Global Companies Consider Diversifying and Expanding GVCs

Post-COVID, an Era of Great Transformation...⑥ Global Supply Chains at a Crossroads

[Asia Economy Reporter Kim Hyewon] Nano powder manufacturer T, located in the North American region, has decided to diversify its advanced industrial materials and components production bases in response to the COVID-19 pandemic. Korea is being considered as one of the new base candidates. European chemical and materials company S plans to expand its production share in Korea and is currently gathering information such as site scouting. Japanese battery intermediate materials manufacturer L is also considering Korea as an investment destination to secure a stable supply chain.

On the 14th, KOTRA and Invest Korea (IK) surveyed 454 global companies through recently established investment base trade offices about changes in management and investment strategies after the end of COVID-19. As a result, 46.7% (207 companies) of respondents said they are considering "diversification of business areas and investment methods." This was followed by "diversification of global supply chains (27.1%)," "advancement of distribution and logistics outsourcing (14%)," and "relocation of core manufacturing facilities to home country (5.4%)." The survey shows that more than 7 out of 10 global companies plan to diversify their business or investments and global value chains (GVC) in response to COVID-19. This means that the major transformation of GVC is not only a problem for Korean companies but a global trend.

By industry, manufacturing prioritizes global supply chain diversification (37.7%) and relocation of core manufacturing facilities to the home country (8.2%), while services prioritize diversification of business areas and investment methods (60.5%). In manufacturing, the high rate of considering supply chain diversification is interpreted as part of GVC risk management measures triggered by COVID-19. Especially, the response rates were high in the order of automobile and parts (61.9%), chemical and materials (43.9%), and machinery and robots (41.9%), which were directly hit by COVID-19. By region, global supply chain diversification is considered by 49.4% of global companies based in China, 30.3% of European Union (EU) companies, and 25.4% of Japanese companies.

In the service sector, signs of GVC changes among global companies have appeared due to COVID-19, such as automation and robot production efficiency and expansion of smart logistics. For example, North American logistics and distribution company L has expressed its intention to establish a logistics center in Korea linked with an online logistics platform.

This content was produced with the assistance of AI translation services.