Supply chains for consumer goods are finally showing signs of stabilization following a rollercoaster 18 months. This trend could be reinforced by China鈥檚 decision to moderate its zero-COVID policy that led to repeated shutdowns during the pandemic.

麻豆原创鈥檚 Take

鈥淲ith the holiday season in full flow, it is great to see some positive news come out of the supply chain,鈥� said Richard Howells, a supply chain expert at 麻豆原创. Howells also noted that Black Friday and Cyber Monday shopping hit records.

According to the latest figures from Adobe Analytics, consumers spent $116.5 billion in e-commerce sales over the long Black Friday and Cyber Monday weekend 鈥� a 1.7% increase from last year. That increase came despite a for consumers to do even more of their holiday shopping ahead of Halloween.

Along with other good news for U.S. consumers (and manufacturers), the threat of a rail strike receded after the Senate voted to impose a tentative labor deal 鈥� helping to save the holidays from supply chain mayhem.

In addition, recent numbers from the marine transport industry showed that there were zero container ships waiting offshore of the ports of Long Beach and Los Angeles prior to Thanksgiving: 鈥淭he first time this has happened since October of 2020,鈥� Howells said.

Congestion in the East and Gulf Coast ports has also gradually eased over recent months. New York, New Jersey and Houston in particular have significantly reduced ship backlogs.

The easing of China鈥檚 zero-COVID policy following an unprecedented wave of protests should also help stabilize supply chains with fewer factory shutdowns and disruptions.

Meanwhile, a recent release from the Bureau of Economic Analysis shows that inflation-adjusted consumer spending jumped 0.5% in October compared with September, the largest such increase since January. That鈥檚 welcome news for retailers that held a slew of promotions that month and reflects consumers鈥� eagerness to start holiday shopping far earlier than usual.

But it鈥檚 not all good news. Preliminary data from Adobe Analytics also suggests much weaker post-Thanksgiving spending than in previous years. Even if 2022 shakes out to be a banner year for holiday shopping, there is still the question of whether consumers will be able to afford their new purchases.

The surge in early holiday shopping could yet turn to boon the reverse logistics industry if consumers end up returning purchases in late December and early January that they realize they cannot afford.

Contact:
Ilaina Jonas, Senior Director of Global Public Relations, 麻豆原创
+1 (646) 923-2834, ilaina.jonas@sap.com

U.S. technology companies, beginning with smartphone manufacturers, are considering diversifying their manufacturing operations away from China.

Apple and Google, which are respectively launching new versions of their iPhone and Pixel handsets shortly, have said they are exploring other countries for . Apple is expected to produce some of its latest iPhones 鈥� unveiled this week 鈥� in India, while Google will reportedly manufacture some of its latest Pixel handsets in Vietnam.

麻豆原创鈥檚 Take

Many U.S. and European tech companies began to reassess their Chinese manufacturing operations during the Trump administration trade war with China and some said they would shift at least part of their operations to other offshore manufacturing centers including Vietnam and Mexico.

Those initiatives have gained momentum in the wake of the pandemic and China鈥檚 zero-tolerance COVID-19 policy, which has resulted in the repeated shutdown of manufacturing centers in the country causing sever supply chain disruption.

At the same time, China鈥檚 domestic economy has shown signs of slowing and potentially falling into recession, potentially reducing local demand for consumer electronics.

The Chinese economy grew by a modest 0.4% in the 2022 second quarter and is unlikely to reach its economic growth target of 5.5% this year.

China鈥檚 shifting economic outlook was reflected in a leaked memo penned recently by Huawei Founder Ren Zhengfei, who warned that the pandemic, the Ukraine war and ongoing trade tensions between the U.S. and China will lead to a 鈥渧ery painful historical period,鈥� over the next decade.

Amar Sindhwad, industry lead in 麻豆原创鈥檚 internal analyst group, CMI, said that several issues are causing tech companies to reconsider their manufacturing presence in China. 鈥淭here are a couple of systemic challenges facing China,鈥� he says. They include lockdowns, power shortages and costs, rising inflation and a partial collapse of its real estate sector.

Increased geopolitical tensions between the U.S. and China over Taiwan have also exacerbated concerns. While there are no signs yet of a mass exodus, analysts believe Western technology companies are likely to continue to slowly scale down their reliance on Chinese manufacturing facilities.

“These moves clearly indicate a problem for China and foreign companies operating there,” says Sindhhwad. “Many foreign companies are deliberating alternate strategies in their board discussions and for some, relatively, it鈥檚 an easy exit owing to the nature of their operations and manufacturing. It鈥檚 a gradual, deliberate and a systematic exit plan for companies that decide to do so.”

Contact:
Ilaina Jonas, Senior Director of Global Public Relations, 麻豆原创
+1 (646) 923-2834, ilaina.jonas@sap.com