Let me start this week by talking about cutting-edge computer chips and dipping my toe in the murky waters of geo-politics.
Last month the BBC reported that the EU was ‘looking to supercharge computer chip production.’ Supplies of the computer chips – needed by car-makers such as VW – are failing to meet demand. Only 10% of these chips were manufactured in the EU in 2020: the target is to double that by 2030.
…But there’s a problem. America and China want to do exactly the same. They’re both in the same position as the EU – reliant on other countries to produce the chips that are vital for their manufacturing industries.
Where are the chips made now? Two companies dominate the market: Samsung in South Korea and the Taiwan Semiconductor Manufacturing Company (TSMC).
Last month, of course, also brought us the story of the Ever Given. Thanks to a gust of wind the Ever Given was firmly wedged in the Suez Canal, holding up an estimated $9.6bn of trade every day.
I knew the Suez Canal was important: I hadn’t realised it was that important. Around 12% of global trade, a million barrels of oil and 8% of all liquified natural gas pass through the Canal each day.
But the Suez Canal isn’t the only vital waterway in the world. The Taiwan Strait lies between the East China Sea and the South China Sea (which carries perhaps a third of the world’s shipping). The Strait is becoming strategically more and more important: way back in 2016 the EU said it wanted to ‘contribute to global maritime security’ by ‘exploring possibilities’ in the region. The Atlantic Council – a think tank based in Washington – has pronounced that ‘Europe’s future is on the line in the Taiwan Strait.’
It’s argument is simple: tension between the US and China could wreak havoc on Europe’s economy.
Three hundred words and you’re now asking a simple question. What does all this have to do with my business? I’m getting there…
China is now Europe’s biggest trading partner. It has also made its stance on Taiwan very clear: we’re going to hear a lot about Taiwan over the next few years, and it won’t all be about its success with Covid. Superpower tension in the area – especially if China decides TSMC is a prize too valuable to ignore – seems inevitable at some point. And if the US imposes sanctions on Beijing as a result, it will expect Europe to follow suit. Leaving European businesses between a very large rock and a very hard place…
I worry that over the last 12 months – as we’ve all done ‘whatever it takes’ to steer our businesses through the pandemic – many SMEs have gone down the same route. Like Europe may do with China, they’ve become over-reliant on one customer or one supplier.
Many business owners I know lost clients and/or suppliers in the first weeks of lockdown. The stark reality of ‘doing whatever it takes’ hit home very quickly. Suddenly any customer was a good customer: suppliers we might not have previously considered became the lifeline keeping the business afloat.
I’ve seen several people quote this week’s title with reference to the pandemic: ‘Everything is changed, nothing is changed.’ Generally, it’s been used as a reference to human behaviour. But it’s equally true of business. On the surface, everything – as we sit at home in front of Zoom – is changed. But underneath, nothing is changed.
The fundamentals of business will always apply. And one of those fundamentals is that no business can be too reliant on one customer or one supplier. As the Ever Given graphically illustrated, it only takes a puff of wind…
Nearly 13 months on from the UK first going into lockdown it is starting to look a little more optimistic. An article in City AM on Wednesday morning suggested that the service sector was recovering quickly, with the Purchasing Managers’ Index due to rise to 56.8 from 39.5 at the beginning of the year and 49.5 in February.
And – far more importantly – as you read this you’re only three days away from a haircut…
Joking aside, the recovery will be a time not just to rebuild your business, but also a time to take stock. It’ll be a time to go back to basics and re-visit your SWOT and PESTLE analyses. To remove the threat of being too reliant on one customer or supplier, and to grasp the opportunity of broadening your customer/supplier base.
We’ve done ‘whatever it takes’ to get through lockdown: now we need to do ‘whatever it takes’ to make the most of the recovery – and get back to the fundamental truths that underpin our businesses.