23008_Nearshoring Report

For specific products where there are key elements that are required in a range of downstream products, there are particularly benefits to nearshoring to ensure resilient and secure supply . For example, the worldwide constraint on supply of semiconductors during the Covid-19 pandemic highlighted how concentrated their production is to a handful of key producing nations. The production of these crucial elements of so many different products was badly impacted by the pandemic, particularly in China – where a third of global exports of semiconductors are produced – due to factory and port shutdowns. As a result, the diversification of supply to a range of different geographies is attractive to ensure an uninterrupted supply of product should there be a shock to specific areas (such as natural disasters) or global shocks (such as a pandemic) that affect different countries/ regions differently. And this is also a factor in the geopolitical dynamics around protecting access to key components such as semiconductors which also is driving the nearshoring phenomenon. Products where there are security concerns or matters relating to the protection of technological sovereignty are increasingly the subject of political controls such as limits or bans on export and high tariffs for non-domestically/regionally made products.

Nearshoring also had benefits for machinery, electronic and electrical equipment manufacturing. This is because the production of these types of products are more likely to use automation within production processes, which reduces the exposure to labour cost differential in locations farther away. Additionally, production locations being closer to customers means increased flexibility and greater control , especially for production of bespoke or ‘contract’ products where customers’ needs may change or adapt through the production process. It also means reduced lead times and improved communication and oversight to ensure quality control.

MACHINERY, ELECTRONIC & ELECTRICAL EQUIPMENT

78

77

C U S H M A N & WA K E F I E L D

I N D U S T R I A L E VO L U T I O N | N E A R S H O R I N G