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ASCM Insights

Can We Conquer Semiconductor Constraints?

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This past week, President Biden signed yet another executive order on the subject of the nation’s supply chains. This latest directive is related to the global shortage of semiconductors, which engineers need to control the electrical properties and behavior of certain materials during manufacturing. The shortage is complicating the production of cars and trucks; personal computers, digital cameras and many other consumer products; household appliances, such as smart refrigerators and washing machines; and countless other common items. In fact, according to the Semiconductor Industry Association, semiconductors are central to “everything that’s modern or electronic.”

To fully grasp the immense challenge of rectifying a global semiconductor shortage, Reuters offers this interesting narrative: “Consider a chip supplied by a U.S. firm for Hyundai Motor Co.’s new electric vehicle, the IONIQ 5. Production of the chip — a camera image sensor designed by On Semiconductor — begins at a factory in Italy, where raw silicon wafers are imprinted with complex circuitry. The wafers are then sent first to Taiwan for packaging and testing, then to Singapore for storage, then on to China for assembly into a camera unit, and finally to a Hyundai component supplier in Korea before reaching Hyundai’s auto factories.”

The article says that producing a single computer chip can involve more than 1,000 steps and 70 border crossings. And semiconductor packaging has another supply chain all its own. The arduous voyage of the semiconductor from the previous example is exhibited in this graphic.

Earlier this week, Biden met with semiconductor industry representatives to examine potential solutions. During the discussion, he recommended allocating $50 billion of his $2 trillion infrastructure proposal to support semiconductor manufacturing and research.

Biden also noted that the American Jobs Plan is about much more than infrastructure: “It’s not just roads and bridges; we’re … building out America’s supply chain so we never again are at the mercy of another country or any other nation for the critical needs.”

According to Reuters, the United States now only accounts for about 12% of worldwide semiconductor manufacturing capacity. The assumption is that much of the semiconductor manufacturing and research investment will go toward the construction of American chip plants for Intel, Samsung and TSMC.

A clearer outlook

If you’re wondering how companies can respond to the shortage, look to The Resilient Supply Chain Benchmark for insights. Developed by The Economist Intelligence Unit and sponsored by ASCM, this high-level summary highlights how real organizations are handling disruption, visibility and flexibility, early-warning systems, supplier collaboration, risk mitigation, and much more.

The report assesses modern supply chain resilience-building capabilities by evaluating the supply chains of 308 publicly traded companies. From this research, the benchmark provides insights into both operational and strategic supply chain resilience, enabling companies to identify and respond to sudden shocks and longer-term structural shifts. Users can pinpoint where their gaps are and better understand them in order to take appropriate action — internally, with partners and in context of the competition.

See how The Resilient Supply Chain Benchmark can help your organization prepare, optimize and thrive.

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer at ASCM, the largest nonprofit association for supply chain and the global leader in supply chain organizational transformation and innovation. Prior to this, he was the managing director for the Operations Consulting Group of American Express Tax and Business Services. His leadership roles have included project management, business process redesign, and individual and organizational alignment. Eshkenazi may be contacted through editorial@ascm.org.

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