Freight containers are stacked on a ship on November 22, 2021 in Bayonne, New Jersey.
Spencer Platt | Getty Images
Morgan Stanley said the most serious supply chain disruptions are already easing and will be more fully addressed in the first half of 2022.
This is the baseline scenario presented by the investment bank in a recent report assessing the global supply chain, its risks and bottlenecks.
This year’s supply chain crisis hit businesses hard as bottlenecks built up and industrial production failed to meet increased post-pandemic demand. Energy shortages in China and Europe, as well as lockdowns linked to Covid, have contributed to the enormous compression of supply chains.
Supply chains remain vulnerable, especially as the world is still assessing the risk of new strains of omicron, Morgan Stanley said.
“However, orders rose due to concern over product supply, inflating backlogs and paving the way for a sharper-than-expected short-term outcome, particularly for consumer electronics and retailers. segments face a risk of destruction of demand, ”the bank’s analysts wrote on Dec. 24. 14 report.
Logistics costs will remain “considerably higher” and will be “persistent until 2022,” Morgan Stanley predicted. “Quarantine and travel restrictions are unlikely to be relaxed for major transcontinental routes in a coordinated fashion until 2022, with little new capacity until the end of 2023.”
For companies producing tech hardware, Morgan Stanley is cautious of those with high lag levels as well as limited visibility into when demand will return to normal. He says he prefers semiconductor companies with exposure to automobiles and manufacturers.
The most critical stocks for supply chains
The investment firm has identified companies it sees as “regional champions”, “recognizing their importance to supply chains and the role that policymakers can play … in supporting their position against competitive pressures from other spheres of influence ”.
“These companies did indeed feature prominently in the global supply chain challenges of 2020/21, but overall we have also seen them display stronger profitability trends and significantly outperform the benchmark. MSCI ACWI global equities, ”the report said. The MSCI ACWI index is composed of equities from the MSCI world as well as indices from emerging markets.
These are the top stocks that Morgan Stanley says are the most “central” for supply chains.
- Technical equipment: Apple, HP, Cisco, Lenovo, Fujitsu, Hitachi
- Semiconductors: Samsung Electronics, Intel, Infineon Technologies, NVIDIA
- Automobiles and components: Volkswagen, Ford Motor, Daimler, General Motors, BMW, Tata Motors, Renault, Hyundai Motor, Continental
- Software: Microsoft, IBM, Dell, SAP
- Insurance: Berkshire Hathaway
- Consumer: Sony, Panasonic, LG Electronics
- Retail: Amazon
- Capital goods: Volvo AB, Siemens
Businesses struggling with bottlenecks
Morgan Stanley also listed the companies it believes were most pressured by supply chain bottlenecks.
“The industries that fall into this category are the ones that transmit the most pressure on the supply chain, in part because firms in this cohort face a persistent dependence on labor inputs. work despite increased automation or capital investments, ”the company said.
Coupled with other factors such as reliance on traded markets or other political frictions, this “leaves these businesses vulnerable to geopolitical and labor dynamics, but also crucial to supply chains. global, ”he said. Some examples include container and semiconductor shipping companies.
These companies may face cost pressure, but they still hold pricing power because of their position in the industry, according to Morgan Stanley.
These are the actions that fall under the “bottleneck” category.
- Semiconductors: Infineon, ST Microelectronics, NXP Semiconductor, Microchip Technology, Texas Instruments, Analog Device, ON Semiconductor, Globalfoundries, Nuvoton Technology, Nanya Technology
- Technical equipment: BYD Electronics, Wingtech Technology, Unimicron, Kinsus Interconnect Tech, Nan Ya PCB
- Networking equipment: Lumentum, II-VI, Corning, CommScope
“In the face of disruption and capacity constraints, options are limited, except to increase prices to offset higher input costs or to ration capacity through backlogs,” Morgan Stanley said of these companies face bottlenecks.