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Walking a tightrope (3): The risks of running tech business

Colley Hwang, DIGITIMES, Taipei 0

According to a KPMG survey, supply chain stability is the biggest business risk in 2022, and 68% of CEOs surveyed agreed that companies must be more resilient to face a high-risk, volatile supply chain.

Wan Hai Lines reported profits of NT$40 billion in first-quarter 2022, and Evergreen Marine also posted significant results. The year 2021 may have been the worst year ever for ocean freight in terms of on-time performance, with delays of seven days or more since the start of 2022, and global freighter on-time performance was only 35.9% in first-quarter 2022, meaning longer transit times, inventory costs, and debt risk for everyone.

The lockdowns in major Chinese cities in the Yangtze River Delta earlier hit hard the supply chian. From Shanghai to Kunshan and Zhengzhou, and from Apple and Tesla to Taiwan-based notebook ODMs - none of them were spared. After the outbreak of the epidemic in 2020, many airlines dismantled their seats and switched from passenger to cargo flights.

But now that passenger traffic has rebounded, we are seeing a decrease in the proportion of passenger to cargo flights, and with a decentralized production system gradually taking shape, we can already expect that the relationship between technology products and air cargo is also adjusting. A better and more resilient supply chain is important. From January to April 2022, Taiwan-based China Airlines' cargo services contributed the majority of the company's overall operating profit, and it can be said that China Airlines' high percentage of cargo fleet and capacity is a part of Taiwan's competitiveness.

In the face of the increasingly urgent issue of climate change, the US has pledged to achieve a 50-52% carbon reduction by 2030 compared to 2005. Japan is to reduce 46% compared to 2013, while TSMC is asking equipment manufacturers to reduce carbon emissions by 20% by 2030.

Less than 10% of listed companies in Taiwan are conducting precise tacking of their carbon footprints, but from the positive attitude of the Financial Supervisory Commission and other organizations, the Taiwanese government is gradually keeping pace with the world on the relevant requirements, and companies can hardly stay out of it. As we await the introduction of TCFD and SASB guidelines, there are already 58 semiconductor companies listed in the Dow Jones Sustainability Index (DJSI), and seven of them are Taiwanese companies.

It's conceivable that carbon trading certificates will become even more popular, with all kinds of costs rising. For example, with the price of natural gas set to soar in 2021, can Taiwan really rely on natural gas as its primary source of electricity? The technology of carbon capture is already in place, but the cost is still high. Taiwan's state-owned oil firm CPC Corp has been ordered to develop hydrogen energy, and Taiwan should actively lay out smart grids and micro grids, and establish a specific and feasible carbon trading mechanism.

Carbon capture and storage technologies will be as difficult and precious as nuclear waste storage in the future. Taiwan's coast is an ideal place to store carbon, but its society does not seem to discuss this kind of issue seriously. We know very little about carbon credits, or carbon trading credits. But we have to be keenly aware of all possible risks and problems, so that we can walk the tightrope more easily.

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.
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