Regional Diversification Pays Off for Companies

Whether through subsidies for an Intel chip factory in Magdeburg or the National Security Strategy, German politics is aiming for greater digital sovereignty in response to current geopolitical risks and supply chain issues. Despite the advantages of regionally distributed procurement, however, companies face significant costs in diversifying their imports of information and communication technologies (ICT), such as microchips or other hardware components. A recent study conducted by ZEW Mannheim and DIW Berlin reveals that a stronger diversification of supply chains, irrespective of ongoing crises, is closely linked to business success.

“Access to ICT goods is vital for the digital sovereignty of the German economy, particularly in highly digitalised industries. This does not mean that these goods must be produced domestically. Instead, it is crucial to avoid unilateral dependencies by adopting a regionally diversified procurement strategy and thereby ensuring long-term access to ICT goods,” explains Professor Irene Bertschek, head of ZEW’s “Digital Economy” Unit and co-author of the study.