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China connected everywhere

The author is the deputy head of the Industry Team of the JoongAng Ilbo.

“Fordism” symbolizes the 20th century mass production era. The automobile factory set up by Henry Ford in Michigan in 1913 changed the concept of manufacturing. The factory produced one type of car — the Ford Model T — and workers were at the moving conveyer belt in the assembly line.

Today’s car production is also a product of Fordism. Mass production incomparable to the past has become possible. The assembly line does not work even when one of 30,000 parts is missing. Each part is supplied according to “JIT” — just-in-time — production, and the production cost is determined by the supply period, unit price and inventory. Success in the market depends on producing similar products at cheaper prices and better quality.

A part, called the wiring harness, stopped the Hyundai Motor factory in Korea for the first time in 23 years. Comments in the news criticize why the company relied on uncertain China and did not diversify suppliers. But it is not an easy task for a manufacturer whose fate depends on the production cost.

Wiring harnesses, which serve as a car’s nerve network, are easily produced, and their supply was not a challenge. So carmakers with production bases around the world choose a supplier that provides parts from the closest location at the lowest price.

Hyundai Motor Group actually has diversified the supplies and receives wiring harnesses from three Korean companies. But the problem is that these companies have factories in China for price competitiveness.

The industry’s analysis of diversifying the suppliers, bearing in mind the possibility of the entirety of China being paralyzed, would be difficult.

After the U.S.-China trade war last year, bad news from China continues. China is already highly connected to the global economy.

The Wall Street Journal wrote that unfavorable factors from China are destroying key manufacturing supply chains and lowering prices of natural resources such as petroleum and minerals. Like it or not, the economy has to go with China.

Hatred is just as “contagious” as the coronavirus. Criticizing China does not resolve the problem. As the Wall Street Journal assessed, China is already the factory of the world — and the biggest consumer.
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