Shipping containers stacked at the Port of Keelung in Keelung, Taiwan, which is the home to several major producers of semiconductors, which will face increase competition as Europe and the U.S. race to increase local chip production.
The automotive supply chain is undergoing a major shake-up because of deglobalization, and no where is is more prevalent than in Europe.
The procurement from offshore locations has fallen by 22 percent over the past two years, according to a report from the Capgemini Research Institute.
The consultancy expects a further decline of 19 percent over the next two years, based on a survey of nearly 600 executives primarily working within the automotive supply chain.
This happens when a business relocates procurement to a country that is geographically closer. For example, for an organization with final consumers in Western Europe, nearshoring could mean procuring from Eastern Europe rather than Asia.
Europe has led the nearshoring trend, with a 25 percent reduction in offshore procurement in terms of dollar value between 2021 and 2023, followed by Asia-Pacific (22 percent) and the U.S. (18 percent), according to the report.
A key factor driving this change is the move to electric vehicles, which the report said is leading to sweeping changes in where companies get their materials.
Nearly three out of five automakers surveyed told Capgemini that investment in battery and EV supply chains is primarily governed by regulation, political mandates and geopolitical concerns -- all of which are likely to push them to work with nearby suppliers.
"The industry cannot nearshore overnight because companies already have an established supply base. However, they can make different sourcing and footprint decisions for the new products they plan to launch. That is why I expect the rate of nearshoring to increase in the coming years," Mercedes-Benz Director Global Supply Chain Marc-Oliver Nandy told Capgemini.
Another part of the supply chain this will see increased nearshoring is the semiconductor sector, according to the report.
Regulations such as the European Chips Act and similar legislation in the U.S. aim to encourage localized semiconductor production to enhance supply chain resilience for national security reasons.
The vast majority of the the executive who were survey by Capgemini -- 70 percent -- get their chips from China, Taiwan, Japan and Korea.
The European Chips Act is intended to double Europe's share of the semiconductor market to 20 percent by 2030. To meet that goal companies such as Robert Bosch and Intel will invest billions of euros to set up chip factories in Germany.
To succeed, the future supply chain needs to be intelligent, data-driven and sustainable, the report said, adding that achieving this could become an automaker's biggest competitive advantage.
