Weekly Roundup - Natural Disasters Threats, Air Travel Mismatch and Shocks in G20 Emerging Economies

A significant 7.2-magnitude earthquake hit Taiwan’s eastern coast near Hualien County, causing nine fatalities and injuring over 1,000. This natural disaster poses a potential threat to the global supply of tech components, such as semiconductors and display panels, due to Taiwan's pivotal role in the tech industry. The island is home to the world's largest chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC), along with other smaller chip manufacturers. These companies supply critical components to major tech firms such as Apple and Nvidia. Despite the earthquake, manufacturers have been proactive in minimizing damage through decades of facility hardening and the use of automatic shutdown systems. TSMC reported that over 70% of its tool recovery was achieved within 10 hours post-earthquake, and Nvidia expects no supply chain disruptions. Nevertheless, some facilities experienced temporary suspensions, and there might be delays in shipments and a need to increase wafer input. The earthquake could also result in short-term disruptions in electronics manufacturing across various economies and might push up prices due to the potential tightening of supplies.

The global airline industry is grappling with a significant mismatch between soaring travel demand, surpassing pre-pandemic levels, and a steep decline in aircraft deliveries from Boeing and Airbus due to production challenges. This has compelled airlines to rely on older, more expensive jets. An expected 19% shortfall in aircraft deliveries is hitting U.S. carriers hard, particularly those dependent on Boeing's 737 MAX, which is further troubled by regulatory and technical hurdles. Airlines are consequently trimming routes and contending with escalating leasing costs, which inflate operational expenses and squeeze profitability. Despite expectations of a robust summer with high airfares, consumer hesitance driven by inflation is influencing travel decisions and fare strategies, placing the industry in a difficult position of navigating between heightened demand and limited aircraft availability, prompting operational and financial adjustments.

The Red Sea crisis is undermining the shipping industry’s carbon reduction efforts, as attacks by Houthi militants force longer routes and more vessels between Asia and Europe, significantly boosting emissions. Extended voyages are adding 10-14 days per trip, requiring more ships and causing a 42% increase in emissions per standard weekly service, with total emissions potentially rising by up to 11% in 2024. This disrupts the industry's goal to meet the International Maritime Organization’s mandate for a 20% emissions cut by 2030. Additionally, the crisis has stalled operators' plans to upgrade to more efficient ships, further complicating efforts to reduce the sector's carbon footprint.

Despite efforts to diversify, the German economy remains significantly dependent on China for essential products and raw materials, a situation underscored by a recent study from the German Economic Institute. Even as total imports from China fell by nearly 20% from 2022 to 2023, Germany's reliance on China for key imports like chemicals, computers, solar cells, pharmaceuticals, and rare earth materials has not substantially decreased or shifted. The study reveals a lack of significant progress in reducing this dependency, with the number of product groups Germany heavily relies on from China slightly decreasing to 200 from 213. This context frames Chancellor Olaf Scholz's upcoming trip to China, which aims at securing fairer market access amidst concerns over dependency and market dominance. This trip, featuring leaders from major German companies, emphasizes the critical balance Germany seeks to maintain with China, amidst broader strategies to mitigate economic exposure following geopolitical tensions, notably after Russia's invasion of Ukraine in 2022.

The International Monetary Fund report underscores the growing impact of domestic shocks in G20 emerging economies, like China and Argentina, on global growth, particularly affecting wealthier nations. These countries have become deeply integrated into the global economy, causing their internal fluctuations to significantly influence worldwide market dynamics. China, for example, accounts for up to 10% of output variation in other emerging markets and 5% in advanced economies. The ten emerging economies in the G20 have more than doubled their global GDP share since 2000, with spillovers from these nations, especially China, nearly tripling in the same period. However, challenges such as China's economic difficulties and a potential pivot in Russia's economy towards Asia could alter these dynamics. The IMF predicts a slowdown in G20 emerging markets' growth from an average of 6% over the past two decades to 3.7%, urging policymakers to prepare for potential shocks to avoid stunting growth across emerging and developing economies.

Dive deep into research

"An optimization model for sustainable multi-product multi-echelon supply chain networks with U-shaped assembly line balancing under uncertainty" by Mehrzad Sheibani, Sadegh Niroomand (2024)

"Multi-component resilience assessment framework for a supply chain system" by Jie Zhao, Ji Yun Lee, Dane Camenzind, Michael Wolcott, Kristin Lewis, Olivia Gillham (2023)

Events

Green Tech Festival

When: 15. - 17. May 2024

Where: Berlin, Germany

What: A pioneering extended festival concept welcomes visitors from all over the world in Berlin to discuss the challenges and opportunities on the MISSION TO NET ZERO. Joined by acclaimed speakers, top exhibitors and a star-studded awards ceremony, the GREENTECH FESTIVAL creates an inspiring space for people, ideas, innovations, companies, and organisations that change the world for the better.

ILA Berlin

When: 05. - 09. June 2024

Where: Berlin, Germany

What: Every two years, ILA Berlin brings the global aerospace industry to the heart of Europe. For five days, Europe’s leading aerospace trade fair transforms Berlin into an international aerospace hub. Industry representatives, policymakers, armed forces and academia come together under the motto #PioneeringAerospace to discuss current challenges and opportunities. Exhibitors from all over the world present their latest developments, innovative solutions, and research projects around the three key topics Innovation, New Technologies and Sustainability.

Hinterland of Things

When: 13. June 2024

Where: Bielefeld, Germany

What: In a rapidly evolving world, staying ahead is a necessity. Hinterland of Things Conference offers access to groundbreaking innovations. Dive into tech sessions, demystify trends, and connect with industry leaders. Transform your company’s DNA with tools, modern solutions, and insights into the future.