The following impact report is part of Global Guardian's 2024 Taiwan Shock Index.

Sector Snapshot: Advanced Manufacturing

Sectors Impacted Upstream: Raw materials, software, energy, semiconductors, metallurgy, chemicals

Sectors Impacted Downstream: Aerospace, construction, transportation and logistics, automotive, medical, electronics

A decoupling with China would cause a major shock to the advanced manufacturing sector impacting supply chains, market size, and open up firms to a number of thorny legal, compliance, and possibly expropriation risks. China’s near monopoly on the primary stages of the semiconductor value chain could create catastrophic disruption to the production and supply of microchips,  photovoltaic solar panels, and batteries.

Short-Term Impact: HIghly Adverse

• Advanced manufacturers would be faced with diminished access to the Chinese market due to a combination of export controls, reciprocal Chinese sanctions, and logistical disruptions in the Taiwan Strait and South China Sea.
• Firms producing strategically valuable or dual use products in China — including semiconductors, complex machine parts, or certain chemicals — would likely be forced to divest from China or face legal sanctions directly.
  • These firms would also have to increase spending on compliance to minimize the legal risks associated with export controls and sanctions.
  • Firms engaged in the production of goods that contain sanctioned components could also face supply chain risks due to sanctions.
• Companies with assets in China may face expropriation risks.
• Manufacturers with production outside of China would likely see increased costs for Chinese-supplied components and raw materials. The procurement of these inputs could become extremely challenging.
  • Most personal electronics use components and materials produced and processed in China. While some of the raw materials, such as cobalt and lithium, are produced abroad, Chinese capital, labor, and technology are highly involved in their extraction.
  • Other raw materials, including rare earths, are largely extracted and processed in China.
  • Chipmakers, firms in the green energy sector, as well as electric vehicle manufacturers, would be highly affected by the increased costs of many of these materials.

Medium to Long-Term Impact: Moderately Adverse

• This sector may see increased costs and tighter margins in the long term.
  
  • The profitability of advanced manufacturing in developed economies has been driven in part by several macroeconomic trends dependent on Chinese growth and integration into the world economy. A hard decoupling would slow, end, or reverse some of these trends.
  • China subsidized the development of strategic upstream sectors like rare earths processing for market capture. The economies of scale that China added to the supply chain reduced costs for both Chinese and Western firms downstream.
  • However, the extent of cost increases for firms is largely dependent on future governmental policy on subsidies and trade.
• In some cases, the loss of access to Chinese markets by foreign firms may be partially offset by reduced competition from Chinese-subsidized competitors.
  
  • As China often prioritizes revenue over profit in its state-owned companies, Chinese companies can operate at price levels that foreign companies cannot. The electric vehicle market is a prime example. With strict reciprocal sanctions and trade restrictions in place, the loss of access to Chinese customers by foreign automakers may be offset — to a degree — by the removal of Chinese automakers from certain foreign markets.

US and Iran Risk Being Drawn Into 'Multi-Front Conflict'

"There's definitely the potential for this becoming a regional conflict, and that's our biggest concern."

Global Guardian Senior Intelligence Analyst Zev Faintuch sat down with Brendan Cole of Newsweek to provide up-to-date analysis of the conflict between Israel and Hamas. Our Intelligence Team is closely monitoring the ongoing situation, drawing on insight from our on-the-ground teams, as Global Guardian actively works to evacuate its clients in the region.

The conflict between Israel and Hamas continues with clashes along the Gaza border and multiple IDF airstrikes targeting Hamas positions. Israel's defense minister ordered the complete closure of the Gaza Strip for the first time, cutting off food, fuel, water, and electricity. Prime Minister Netanyahu has ordered the military to evacuate residents around the Gaza and Lebanon borders in advance of further activity. At the same time, cross-border exchanges of mortar and artillery continue between the IDF and Hezbollah in the north, setting the stage for a major conflict that could embroil the entire region.

CONFLICT IN ISRAEL

At approximately 06:30 local time, Hamas launched a multifaceted surprise attack on Israel, with a massive rocket barrage and a mass infiltration of hit squads into Southern Israel. Dozens of Israeli civilians have been kidnapped and taken to Gaza as hostages, as Hamas terrorists took control over several townships and military installations. Over 2,200 rockets (Palestinian sources claim 5,000) were fired into Israel, with more than one-third of the Israel population impacted, including Tel-Aviv and Central Israel. Israel has declared a State of War and is mobilizing its reserves as it attempts to regain control over the communities around the Gaza Strip. The situation is rife with escalation potential with regional implications.

China Is Becoming a No-Go Zone for Executives

“It feels very Hollywood-ish, but it is unnerving.”

In The Wall Street Journal, Global Guardian CEO Dale Buckner weighs in on the complexities of business travel to China amid reports of Beijing barring executives from leaving the country—and discusses the factors that might put a traveler at greater risk of detention.

China Watcher: Taiwan shivers over Ukraine funding freeze

“It is now a calculated decision to put an expat in mainland China.”

Global Guardian CEO Dale Buckner weighs in on the growing corporate concerns in China and how businesses are taking action to mitigate the risk of exit bans in Politico's China Watcher newsletter.

'We're pretty much done': 'Unwavering' support for Ukraine starts to waver

"Should strategic gains not be secured by Ukraine soon, time will be her greatest enemy as the probability of this turning into a frozen conflict increases."

In USA Today, Global Guardian Senior Intelligence Analyst Zev Faintuch discusses the current state of the Russia-Ukraine war and why Ukraine's strategic gains are important to overall support from its allies.

Ukraine strikes deep inside Crimea, cuts through Surovikin Line

“When [countries] see Ukraine moving forward, that strengthens their righteous position on the world stage to say, ‘You need to back us’. If the Russians were blowing through Ukraine, a lot of midrange countries might say, ‘We’re going to hedge our bets on this.’”

In a recent interview with Al Jazeera, Global Guardian Vice President of Client Risk Management Seth Krummrich sheds light on Ukraine's progress on the southern front and the influence it has on President Zelenskyy's plea for increased support from Western nations.

Why Ukraine's Raft of Breakthroughs Will Worry Putin

"To achieve their goals, Ukraine needs to keep steady pressure and inflict losses on Russia. They don't need a breakthrough victory tomorrow."

In Newsweek, Global Guardian Vice President of Client Risk Management Seth Krummrich discusses the latest Ukranian counteroffensive in western Zaporizhzhia and how it impacts Putin and Russian forces. Krummrich also weighs in on Kyiv's strategy as winter approaches.

Putting Physical, Digital Security Under One Roof As Threats Swirl

“The role of executive protection has become more substantial. We are seeing a lot of clients asking for that....People are moving to using private residential guards and for them to be 24/7 in their homes."

In Family Wealth Report, Global Guardian SVP of Strategic Partnerships Michael Coleman weighs in on multiple trends impacting the safety and security of high-net-worth individuals and their businesses—including data privacy, generative AI, crime in certain regions, and relations with China—and how Global Guardian is holistically supporting its clients.