Semiconductor Ascent: Reaching for Higher Ground

In the current landscape, the persistent chip shortage, spurred by a confluence of factors including the global pandemic, heightened demand, and geopolitical tensions, unequivocally underscores the indispensable role of semiconductors in the realm of modern technology. With an annual sales volume surpassing the half-trillion-dollar mark, the industry stands at a crossroads, necessitating strategic responses such as heightened domestic production and diversified supply chain strategies.

The critical components found in modern electronics called Semiconductors have been the centre of discussions around the world. Used in a wide range of products, from smartphones and laptops to automobiles and medical devices, these chips and their supply chains are increasingly rivalling oil and gas in terms of their importance to international relations. Among the most critical sectors of the global economy, the annual sales of semiconductors are staggeringly large: more than half a trillion dollars in 2022.

The importance of the semiconductor industry and its supply chain was best demonstrated by the recent period of shortage and the drastic economic consequences it had.

The shortage of semiconductors, which started in 2020, stemmed primarily from a confluence of factors including the disruption caused by the COVID-19 pandemic, causing production slowdowns and delays, the heightened demand for consumer electronics, remote work technology & automotive electronics, and geopolitical tensions & trade restrictions. The amalgamation of these factors resulted in a perfect storm, culminating in a shortage that has had widespread repercussions affecting more than 169 industries.

Dr. Amitabh Saran, CEO and Founder, Altigreen, said, “The semiconductor industry has faced a myriad of challenges and vulnerabilities in recent years. The aftermath of the pandemic, coupled with geopolitical tensions and conflicts, has exposed the risks of the global semiconductor supply chain.”

As a result, many companies are struggling to meet consumer demand for their products, leading to revenue losses and market share erosion. This ongoing shortage continues to cause challenges to the semiconductor supply chain.

The semiconductor supply chain currently faces several major challenges and vulnerabilities, which have significant implications for the global economy and various industries. “At present, it faces challenges such as economic pressures, talent shortages, regulatory complexities, and technological disruptions,” said Dr. Saran.

SOME OF THE KEY CHALLENGES INCLUDE:

 • High Geographic Concentration: The semiconductor industry is not evenly distributed globally, with Taiwan dominating global semiconductor production. This concentration creates geopolitical and economic vulnerabilities for the United States, its allies, and Taiwan.

 • Geopolitical Friction: The deteriorating relations between China and the US have led to increased tensions and risks in the semiconductor supply chain. China considers Taiwan a province of greater China and has not explicitly stated that it would not invade the independent nation, which could disrupt global supply chains.

• Nationalistic Self-Reliance: Nations are increasingly pushing to restore their operations and become less dependent on other countries, which could eventually ease supply chain strains by putting goods closer to customers. However, this process will take years to complete and may exacerbate talent shortages and competition for highly skilled workers in the semiconductor industry.

Another crucial is that of talent shortage. “The semiconductor industry relies on a skilled workforce. Shortages of skilled labor can affect innovation and production capacity,” says Mr Jatin Khera, Head of Operations, Intellectle Inc. “This shortage of labour is due to difficulty in recruiting and retaining skilled workers,” he lamented.

Consulting firm Deloitte warns that by the year 2030, more than 1 million additional skilled workers will be needed to meet demand in the semiconductor industry. This competition for highly skilled workers can make the industry less attractive for investment and expansion.

In addition to the talent shortage, Mr Khera also talks about how technological complexity and lead times are standing tall as a challenge for the industry.


This is an abridged version of the story published in the December edition of the Logistics Insider Magazine. To read the complete story, click here.

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