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Beware three challenges for 2022 business operations

Enterprises, for business operations in 2022, must be cautious about three challenges: Geopolitical risks, economic impact of inflation, pressure (from governments' policies and clients' requirements) regarding net zero carbon emission, according to chairman Paul Peng of the Taipei Computer Association (TCA) as well as TFT-LCD panel maker AU Optronics (AUO).

Russia's invasion of Ukraine is an example of a geopolitical risk, Peng said. As Ukraine is a large supplier of wheat and corn and Russia supplies natural gas and oil, the invasive war is likely to push up international prices for food and energy and, in turn, aggravate global inflation and, consequently, global demand for ICT products will decrease, Peng noted.

In the past, globalization led manufacturers to choose the locations of production with the most production efficiency and lowest production cost, Peng indicated. However, geopolitical risks have forced manufacturers to shorten supply chains, to reduce production scales, and to choose places where production efficiency is not the highest, implying that the previous corporate configurations for inexpensive ICT products will come to an end, Peng explained.

For enterprises, multiple government policies on net zero carbon emission and clients' increasing tendency to require use of green energy to reduce carbon emissions impose long-term pressures on business operations, Peng noted.

The pressure has caused much worry in Taiwan, where generation of green energy is far insufficient to meet large demand and transactions of green energy certificates are inclined to be in favor of certain manufacturing industries, Peng indicated. Despite pressure of competing for green energy, AUO has had the advantage of operating a PV power generation business for more than 10 years, Peng said.

For AUO's business operations, there are quite large inventories of TV-use panels en route to destinations due to longer marine shipping time following coronavirus pandemic, not including the China market where TV demand makes up about one-third of the total global demand for TVs, Peng noted. IT-use panels have been more affected by long marine shipping times, for the US and Europe are the main markets for IT products, Peng indicated, adding that, however, some of those panels have been shipped by air.