Companies increasingly building production facilities in europe
The scarcity of raw materials, the semiconductor crisis, endangered transport routes and an increasingly complex geopolitical situation: In light of these challenges, Europe is once again becoming an important location for technology groups and medium-sized businesses from the leading industrial nations, who now want to relocate their production sites to Europe.18 May 2022
Many European businesses have been forced to reassess their global strategy thanks to developments triggered by the pandemic and exacerbated by the tense geopolitical situation. It is becoming increasingly risky to have production sites in parts of the world that are far from the market, use supply chains that run along geopolitical trouble spots, or use generally long and, therefore, expensive transport routes.
That is why many European businesses are considering taking production out of Asia and bringing it back to Europe. One reason for doing so would be to shorten supply chains and reap the benefits of being closer to both the market and to customers. Moreover, these businesses are finding support for such decisions in the political arena, both at the national and international level. The EU Chip Act brought about by the European Commission is a good example of this: The new chip legislation provides for funding amounting to 43 billion euros. The European Commission's ambitious goal is to double the share of European semiconductor production to 20 percent by 2030.
It has only been possible to think strategically about stepping up production in Europe thanks to the technological advances that have been made in the area of automation. Industry 4.0 technologies, progress in artificial intelligence applications and, not least, the steadily increasing number of industrial robots being used make it possible to produce competitively and locally. Or so say those in support of taking production out of Asia and relocating back to Europe. Nevertheless, there are relatively few German businesses that are even considering relocating their global sites back to Europe. Indeed, just under a fifth of the businesses who are producing in traditional manufacturing countries and also active in Germany are seriously considering taking this step. C&A is one of them. The company makes its jeans in Mönchengladbach. CATL will soon be building batteries in Erfurt. Infineon is producing more and more of its chips in Dresden.
And there are also businesses that have made the conscious decision to move their production facilities from Asia to Europe. Such as the Japanese robot manufacturer Yaskawa. The desire to have a presence in the growing European market, coupled with the short transport routes and supply chain security that relocating to Europe provides, was a decisive factor in the company’s decision to produce locally, and more specifically: in Europe.
Only time will tell whether industrialized nations will experience a sort of “retreat” from Asian or Latin countries, and relocate production back to Europe, or whether businesses from non-European industrialized nations will ramp up production in Europe. Although it is worth noting that relocating production already seems to be paying off for certain businesses.
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