"Unresolved" Global Supply Chain Issues Continue to Plague the World This Year

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Following last year, global supply chain issues continue to hamper companies this year as well. The prolonged imbalance between supply and demand, which began with COVID-19, has caused not only shortages of key components such as automotive semiconductors but also difficulties in securing labor and logistics, making the resolution of supply chain risks a core business challenge this year.

According to Bloomberg and other sources on the 30th (local time), Tesla stated in its earnings announcement on the 26th that its factories have been operating below production capacity for several quarters due to semiconductor supply chain disruptions, and this situation is expected to continue this year. Despite recording record-breaking results last year with sales of $53.8 billion (approximately 64.7 trillion KRW) and operating profit of $5.5 billion, the outlook for this year raised concerns.

Global supply chain issues have been a long-term problem since the outbreak of COVID-19 in 2020. From factory shutdowns caused by COVID-19 to difficulties in securing parts and shortages of labor and logistics, companies worldwide are under pressure. Recently, the rapid spread of the Omicron variant, rising raw material and logistics costs, accelerated U.S. tapering (asset purchase reduction), and global financial market instability due to tightening have further increased uncertainty in the business environment.

Elon Musk, CEO of Tesla, said that supply chain issues are holding the company back and announced that no new products would be launched this year. Following Musk’s announcement, Tesla’s stock price dropped more than 10% in a single day, and its market capitalization evaporated by 131 trillion KRW in one day.

Concerns about supply chain issues this year are not limited to the automotive industry. Whirlpool, a U.S. home appliance company that lost the global home appliance sales top spot to LG Electronics last year, also expects supply chain issues to persist due to the spread of the Omicron variant, making it difficult to obtain appliances such as washing machines and refrigerators. Mark Bitzer, CEO of Whirlpool, said that although they tried to increase production last year, they faced difficulties due to shortages of labor and parts, and the situation is expected to continue this year, with high costs being paid for raw materials and labor. If costs increase, product price hikes are also inevitable.

These supply chain issues are also expected to significantly impact the business of major domestic companies such as Samsung Electronics and LG Electronics this year.

Samsung Electronics stated during its Q4 earnings conference call on the 27th that regarding this year’s semiconductor investment plans, "Due to supply chain issues with parts, the timing of equipment delivery is being delayed, and investment plans will be established and executed considering this." This means it is difficult to set annual plans amid significant uncertainties regarding parts, logistics, and labor.

Not only in semiconductors but also in the home appliances sector, Samsung Electronics explained, "Risks of increased material and logistics costs are expected to continue this year," adding, "Currently, the rise in raw material and logistics costs is due to high logistics demand, a shortage of shipping personnel caused by variants such as Omicron, and continued strength in raw materials due to inflation."

LG Electronics, which operates in high-risk sectors such as home appliances and automotive components, also expects uncertainties to persist this year due to the resurgence of COVID-19, rising raw material and logistics costs, and exchange rate fluctuations. Therefore, it plans to focus its capabilities on securing profitability through premium strategies and global supply chain management.

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