Resilience is critical for supply chain success

Exiger’s Skyler Chi talks to Silicon Semiconductor reflecting on what the semiconductor industry supply chain will look like in the ‘new normal’ and the impact this will have on businesses and why they must diversify their supply chain to prevent disruption.

SS: What does the semiconductor industry supply chain look like in the ‘new normal’, in a world where energy prices and geopolitics are causing ongoing, major disruption?

CT: The semiconductor industry supply chain in 2023 and beyond will likely face ongoing challenges due to the effects of global regulatory changes and investment decisions. The CHIPS Act and other similar initiatives aim to boost domestic semiconductor production, leading to a fragmented and less globalised supply chain.

Additionally, the increasing focus on renewable energy sources and reducing carbon footprint will likely drive investment in new technologies such as edge computing and 5G, further complicating the supply chain. The ongoing geopolitical
tensions may also lead to stricter regulations and trade restrictions, causing supply chain disruptions and hindering the flow of goods and resources.
In this new normal, companies in the semiconductor industry will need to adapt to the changing landscape through greater supply chain resilience, diversification, and investment in innovation.

Additionally, the US-China trade tensions and the efforts by the US to reduce its dependence on Chinese suppliers will result in a shift in the industry’s supply chain dynamics.

Companies will need to look for alternative sources and suppliers, leading to a more fragmented and localised supply chain. This could result in higher costs, longer lead times, and increased risks for companies.

Additionally, the US government’s efforts to encourage domestic semiconductor production through initiatives like the CHIPS Act may lead to increased competition and reduced reliance on foreign suppliers. This could result in a more stable and secure supply chain but may also lead to higher costs and reduced innovation as companies adapt to the new landscape.

Overall, the US effort to remove China from its most critical supply chains will likely lead to significant changes in the semiconductor industry supply chain, including increased localisation, greater competition, and the need for companies to adopt new strategies to manage risks and ensure stability.

SS: How are new regulations affecting the semiconductor industry supply chain?

CT: New regulations are having a significant impact on the semiconductor industry supply chain. Increasingly, governments around the world are implementing regulations aimed at boosting domestic production, reducing dependence on foreign suppliers, and promoting technology security. These regulations are affecting the industry in several ways:

Domestic production (reshoring): Government initiatives like the US CHIPS Act are aimed at boosting domestic semiconductor production, which could lead to a more localised and fragmented supply chain. Companies may need to adapt to the changing landscape by investing in new technologies and expanding their local production capabilities.

Trade restrictions: Governments are also implementing trade restrictions and sanctions on certain countries and companies, which could impact the flow of goods and resources in the supply chain. Companies may need to find alternative sources of materials and components, which could increase costs and lead times. New regulations such as those designed to protect against slave labour and human rights abuses in the production of materials, including silicon, is a growing concern in the semiconductor industry. Companies are under increased pressure from consumers, governments, and advocacy groups to ensure that their supply chains are free of forced labour and human rights abuses.

Technology security: Governments are also implementing regulations aimed at protecting national security and technology, which could impact the flow of information and intellectual property in the supply chain. Companies may need to implement stronger security measures and adopt new technologies to protect their information and IP.

Environmental regulations: Governments are also implementing regulations aimed at reducing carbon emissions and promoting sustainability, which could impact the production and transportation of materials and components in the supply chain. Companies may need to invest in new technologies and adopt more sustainable practices to comply with these regulations.

Overall, new regulations are affecting the semiconductor industry supply chain by creating new challenges and uncertainties, as well as opportunities for innovation and growth. Companies will need to adapt to these changing conditions through greater supply chain resilience, diversification, and investment in technology.

In high-risk regions, companies will need to implement due diligence and responsible sourcing practices to identify and eliminate slavery and human rights abuses in their supply chains. This may include conducting risk assessments, implementing supplier codes of conduct, and partnering with advocacy organisations to monitor and improve working conditions.

Failure to address these issues could result in reputational damage, decreased consumer trust, and potential legal and regulatory action. Companies will need to take proactive steps to ensure that their supply chains are free of slavery and human rights abuses, and to promote transparency and accountability in their sourcing practices.

The semiconductor industry, being a critical component of many high-tech and industrial sectors, has a responsibility to ensure that its supply chain is free of slavery and human rights abuses.

Addressing this issue will require collaboration between companies, governments, and advocacy groups, as well as a commitment to responsible and sustainable sourcing practices.

SS: How can technology enable businesses to build stronger and more resilient semiconductor supply chains?

CT: We at Exiger believe that technology can play a central and absolutely crucial role in enabling businesses to build stronger and more resilient semiconductor supply chains. For example, technology can assist with:

Supply chain visibility (bridging): Technology can provide real-time visibility into the flow of goods and information throughout the supply chain, enabling businesses to identify and respond to risks and disruptions more quickly.

Automated risk assessments: Technology can automatically identify and analyse risks in the supply chain, such as potential disruptions, human rights abuses, and environmental impacts, allowing businesses to make informed decisions and respond proactively.

Supplier management (buffering): Technology can help businesses manage and monitor their supplier relationships, including sub-tier suppliers, by providing a centralised platform for communication, collaboration, and data sharing. This can help businesses reduce the risks associated with working with suppliers and ensure that suppliers are meeting their obligations.

Predictive analytics (e.g., digital twin): Technology can provide predictive analytics capabilities that help businesses anticipate and respond to potential supply chain disruptions and other risks. For example, predictive analytics can be used to analyse data on production capacity, supplier performance, and market trends to identify potential risks and make proactive decisions to mitigate them.

Blockchain technology: Blockchain technology can provide a secure and transparent ledger of all supply chain transactions, enabling businesses to ensure the integrity and accuracy of data and track the flow of goods and information throughout the supply chain.

Overall, technology can help businesses build stronger and more resilient semiconductor supply chains by providing real-time visibility, automating risk assessments, improving supplier management, enabling predictive analytics, and promoting transparency and security.

SS: In this ‘new normal’ how should semiconductor industry organizations structure their supply chains to make them more resilient?

CT: To make their supply chains more resilient in the new normal, semiconductor industry organisations should consider the following steps:

Diversify suppliers: Diversifying suppliers can reduce the risk of dependence on a single source and help to ensure that critical components and materials are available even in the event of a disruption.

Implement real-time visibility: Implementing real-time visibility technologies, such as RFID and IoT sensors, but also full network illumination and detection, can help organisations to track the flow of goods and information throughout the supply chain and respond quickly to disruptions.

Establish risk management processes: Organisations should establish robust risk management processes that enable them to identify, assess, and respond to potential supply chain risks, including those related to geopolitical tensions, natural disasters, and health pandemics.

Foster partnerships: Organisations should foster partnerships with suppliers, customers, and other stakeholders to promote collaboration and build greater resilience in the supply chain.

Adopt digital technologies: Adopting digital technologies, such as blockchain, AI, and predictive analytics, can help organisations to automate risk assessments, improve supply chain visibility, and make informed decisions to reduce the impact of disruptions.

Invest in sustainability: Investing in sustainability, including environmentally friendly and socially responsible sourcing practices, can help organizations to reduce the risks associated with supply chain disruptions and promote long-term resilience.

Establish contingency plans: Organizations should establish comprehensive contingency plans that outline the steps to be taken in the event of a supply chain disruption, including alternative suppliers, logistics options, and risk mitigation strategies.

Overall, to make their supply chains more resilient, semiconductor industry organisations should prioritise diversification, real-time visibility, risk management, partnerships, digital technologies, sustainability, and contingency planning.