If two years ago someone could have foreseen a perfect storm in an increasingly interdependent world, they could not have projected it better. The pandemic that began in January 2020 put to the test what was believed to be a system built on solid foundations and began to creak and not because of a recession or a financial crash, as in 2009.
This time, what fueled an unprecedented production chaos was the coup de grace that an epidemic that began in a remote part of China became universal, altered production rates in the great world factory that is all of Southeast Asia, disrupted the flow of international maritime transport. There were lines that were discontinued and ports, such as Buenos Aires, that ceased to be attractive to shipowners. This aspect and the delays in shipping times and additional procedures for each container at the origin or destination (customs, sanitary or logistics) increased the cost of the product in dollars.r. It even conspired the global environmental imbalance: the lack of water due to rains aggravates the problem in Asia to cut silicon, a key input in the manufacture of chips.
It also happened that in these two years there has been an increase in the demand for consumer products that, due to various innovations, increasingly use more intelligent systems powered by chips in a communication network that is facilitated by nanotechnology: each time a smaller element has a higher performance.
interrupted chain. In his last visit to the country, the CEO of Renault Group, Luca de Meo He anticipated to Noticias what, for a manager with many flight hours in a hyper-globalized industry, as is his case, he projects as a near future: “in five more years, 50% of the value of a car will be software and electronic components”. That is why right now, one of the sectors that suffers most from this supply mismatch is the automotive sector. At Renault Argentina, for example, they recognize the existence of the problem that is affecting the automotive industry globally. “Locally, we have a Crisis Committee that permanently monitors the situation. It is estimated that the shortage problem will continue until at least mid-2022”, they specify at the Santa Isabel plant.
Another important player in the industry, Toyota, also faces this peculiar problem and they point to a common thread: the pandemic caused changes in consumption patterns, which generated a greater demand for electronic components. “The problem exists and affects our entire sector, where we also have to add some inconveniences in maritime transport logistics. From Toyota Argentina Since the beginning of the pandemic, we have worked very closely with our suppliers and our headquarters to continue producing without problems. It is a matter of work and risk management and we hope that it will be regularized by mid-2022”, they explain.
Complexity. However, the changes that occurred in the reference values, in the delivery times and the uncertainty due to the precision in the production line brought an additional demand in the security inventories, an issue that fed back the peculiar crisis.
In addition, the new factories are oriented towards producing smaller things, with the consequent disruption of what is already being produced, widening the spectrum of scarcity, already worrying, in some niches of the industry.
“But the key point that made the market explode in the last three years was the peak in demand, just when supply difficulties appeared: and the factories ran out of chips,” he summarizes. Diego Madeo, executive director of Garnet Technology, a leading company in the design and manufacture of security products for the home. Unlike other peaks in demand characteristic of the industrial cycle, this one was sustained over time with more demand, fueled by the new consumption conditions during the pandemic. The response of the large conductor producers, which are concentrated in giant corporations with plants in China (70%) and the United States (30%), has its own times. “To set up a factory takes 3 or 4 years and billions of dollars of investment” Explain.
The asymmetry in this configuration is remarkable: the bargaining power of the large producers contrasts with the type of company that demands, many of them global SMEs that are small consumers alongside others that do not allow themselves to run out of raw materials.
All this produced delays of between 9 and 12 months in delivery times and a multiplication of prices (in dollars, of course) that caused the price of some of the components used by the industry to jump from US$ 3.5 to US$ $20 in a year and a half. To the cost problem (for example, only one alarm panel has 350 chips) you have to get the supplies yes or yes so as not to interrupt the production cycle.
Future. This current problem does not have much urgency for the general public, but it will gain visibility when scarcity alters consumption habits. And it is also the basis of a great business in the future, with the installation of new factories to feed a world that is increasingly technological and powered by the “Internet of Things” (IOT) that it is estimated will only be able to reach this new balance in two years.
Meanwhile, uncertainty, such a common scenario for Argentine products and consumers, will be the new normal until a stroke of fate or an unexpected innovation puts things in a new balance. Welcome to the new “Argentine” paradigm.
by Marcelo Alfano
