Why global scale is no longer enough in a fractured world

(Edited and refined by Grace Chong, with the assistance of AI translation.)

Apple has accelerated the shift of iPhone assembly for the US market to India in recent years. Yet while the production map is changing, the equipment, engineering expertise, critical components, certification systems and supplier networks that underpin every iPhone are not relocating at the same pace.

Apple's 2025 annual report acknowledges that some components still depend on single or limited sources, and that major supply chain changes require significant time and resources. Factories can move, but capabilities cannot be transplanted overnight. The production map may have changed, but has Apple itself truly changed with it?

Geopolitics has moved from the headlines into the boardroom. Tariffs, export controls, data regulations and investment screening are reshaping supply chains, technology platforms, capital allocation and corporate decision-making.

The consequences became starkly apparent in 2018, when a US denial order forced ZTE to suspend its main business operations. A company may be vast, but if the critical nodes that sustain its operations are controlled by others, it can lose its ability to function almost overnight.

The same clustering or concentration of capabilities, however, can also confer extraordinary leverage. Whereas ZTE depended on critical nodes beyond its control, TSMC and ASML have become critical nodes themselves. TSMC sits at the heart of advanced semiconductor foundry manufacturing, while ASML remains the world’s only supplier of extreme ultraviolet (EUV) lithography systems.

They are no less constrained by government policies, customers or upstream suppliers. What sets them apart is that the capabilities at the heart of their competitiveness remain firmly under their control. Concentration of capabilities can be either a moat or a noose. The difference lies not in concentration itself, but in whether a company controls its critical nodes — and has the authority to configure them and make the necessary trade-offs.

Scale is not enough 

For companies operating across multiple regulatory systems, retreating to their home markets is rarely a solution. Markets, customers, technology, capital and talent have long been distributed across different countries.

Scale is not necessarily an advantage. Only governable scale is.

Governability means the board has clear visibility, management can make timely decisions, and the company can continue to adapt under pressure. Whereas resilience is concerned with recovering from disruption, governability starts earlier: it is the capacity to adapt before a crisis, maintain control during one, and respond effectively in its aftermath.

Governability comes at a cost. Greater regional autonomy often requires ceding some central control. Separate systems add complexity and expense, while maintaining a viable alternative pathway is typically more costly than relying on a single, optimised operating model. The board’s task is not to insure against every conceivable risk. It is to identify the failures that could bring down the entire system and invest in critical fallback options before they are needed.

But orders will not wait for supply chains to recover, and customers will not wait indefinitely. Companies that can continue producing, delivering and making decisions while others are paralysed will not only preserve their existing business, but also gain market share by winning new orders and customers. Governability may seem like an unnecessary expense in stable times. During periods of disruption, however, it becomes a driver of growth.

Decision-making must move

The first test is whether authority and accountability can move with the business.

Geopolitical pressure rarely arrives evenly. It often surfaces first in a single market, where export controls tighten, cross-border data flows are restricted, investments come under review, or suppliers abruptly lose approval. If local teams can execute but not decide, customers are left waiting, production can grind to a halt, and headquarters is drawn into decisions that should have been made locally.

Schneider Electric has organised its global operations around four regional hubs — North America, Europe, China and India — allowing sales, R&D and supply chains to operate with greater regional autonomy while remaining aligned through common standards and a global operating framework. During the Covid-19 pandemic, one business unit validated hundreds of materials, components and suppliers in less than three months, proving how quickly the model could adapt. Today’s challenges — export controls, data restrictions and geopolitical tensions — are even more demanding. Without the authority to make decisions where disruptions occur, a global footprint is little more than dots on a map.

Connectivity needs governance 

Clear authority and accountability are only the beginning. The next challenge is connectivity. Shared technology platforms, integrated customer networks and common digital infrastructure are what allow global businesses to operate at scale. Yet as China-US strategic rivalry deepens, the very connections that once enabled efficiency have become sources of geopolitical exposure.

To continue operating in the US, TikTok placed responsibility for US user data, software assurance, algorithm security and content moderation under a new US joint venture entity, with ByteDance retaining a 19.9% stake. This allowed US creators and businesses to continue accessing global content and commercial networks. Meanwhile, Microsoft took a different approach in China: Azure China is physically separated from Microsoft Azure and is operated and commercialised in China by 21Vianet. One approach involved restructuring governance under national security pressure; the other involved operating locally within regulatory boundaries.

These are not templates, but they illustrate a broader reality: global companies can no longer ignore political boundaries. Global systems cannot cross every political boundary unchanged, nor can they simply be dismantled. Where data is stored, who can access it, who operates systems and who bears responsibility when something goes wrong must all be clearly defined.

Global operations do not mean operating without boundaries. They mean preserving connectivity after those boundaries have been made clear.

Real backups require real alternatives

Having boundaries around connectivity does not mean a business already has a fallback option. A company’s backup capability exists only when another supplier, factory or system can genuinely take over when the original fails.

After the 2011 Great East Japan Earthquake, disruptions to the supply of as many as 1,260 vehicle parts affected up to 80% of Toyota’s global production. Restoring operations required far more than finding alternative suppliers. The company had to rebuild damaged supply chain nodes, shift production, develop substitute components and repeat quality validation.

In the aftermath, Toyota established the RESCUE database to map multi-tier supply chains for around 6,800 parts and began conducting regular contingency drills with suppliers.

If two suppliers both depend on the same upstream factory, or two plants both lack the same critical material, there are only two names on paper, not two alternatives.

A true backup is a separate supply and production route that has already been validated, can operate during normal conditions and can take over when disruption strikes. The lesson applies equally to earthquakes, export restrictions and politically driven supply interruptions.

The board’s final stress test

Reconfiguring authority and accountability, redrawing the boundaries of connectivity and building backup pathways are not one-time fixes that solve the problem permanently. When a new disruption appears, management must first determine where pressure will land, which parts of the business will be affected, what disruptions can be absorbed, what could destabilise the wider system, and who can step in if existing pathways fail. Only then can the company decide whether to delegate authority, establish alternative routes, separate systems or reconfigure production capacity.

Once these adjustments are in place, the board faces one final stress test: who decides? How far can the disruption spread? And how quickly can the business reconnect its operations? The board does not need to manage operational details. It simply needs to insist on clear answers to three questions: who can make decisions immediately? Where will the disruption stop? And who takes over when existing operations break down?

Only when those questions have clear answers does the company retain room to manoeuvre. Without them, even the most elaborate contingency plans are little more than an illusion of preparedness.

The changing value of countries 

As more companies reconfigure their global operating networks, the strategic importance of different countries will also be reassessed.

Market size, cost advantages and policy incentives remain important, but they are no longer enough. For hub economies such as Singapore, the value is not simply in attracting more regional headquarters. It lies in whether companies are willing to bring in capital, talent, data and decision-making capabilities — and whether, when disruption occurs elsewhere, orders, investment and critical functions will flow there.

This value is not a label. It is the result of companies voting every day with capital, talent and decisions. It must be continuously earned: rules must remain predictable, cross-border flows must be stable, and companies must be able to keep operating during crises. A country’s value may be measured less by the size of its market than by how well it enables companies to govern their global operations.

The ultimate test is not whether a company remains completely unscathed. It is whether it retains options under pressure: it must not allow a single point of failure to easily disrupt supplies and services to customers, nor allow years of investment and market development to become trapped by one critical node with no alternative.

Governable scale means the board has clear visibility, management has the authority to act, and the company retains the flexibility to adapt under pressure.

This article was first published in Lianhe Zaobao as “可治理的规模才是优势”.

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