A version of this article originally appeared on siliconsemiconductor.net on January 31, 2024.
Now semiconductor production and distribution are deemed critical infrastructure around the world. As public, political, and academic awareness grows, governments, the industry and end customers are exploring options to secure production from sand to chip.
In response, governments are incentivizing onshoring through policy initiatives. Significant investments are being catalyzed by legislative acts such as the U.S. Chips and Science Act, the EU Chips Acts and China’s Integrated Circuit Industry Investment Fund. These initiatives are motivating businesses to establish new production facilities and enhance national self-sufficiency.
These efforts, aimed at bolstering national resilience against future crises, are strategically redefining global semiconductor hubs. This geographic reset will undoubtedly further disrupt the collaborative balance that has supported the industry, which has grown through a distributed supply chain business model.
What are the primary complexities?
Technology and market trends have concentrated cutting-edge manufacturing and testing capabilities among a handful of global hotspots, including China, U.S., South Korea, Japan, Malaysia, Philippines and, most importantly, Taiwan. However, none are independent enough to sustain the whole supply chain on its own.
The current trend of onshoring isn’t inexpensive or quick. Industry estimates suggest each chip factory takes a minimum of $10 billion and five years to build, from breaking ground to production of chips.
Amid intense competition, it is harder to attract and retain personnel. As semiconductors become ever more critical to product differentiation, some electronics and automotive manufacturers beginning to move chip design in-house. This is increasing competition for scarce talent and could undermine expansion plans. Additionally, chip design is becoming more complex due to the requirements of Artificial Intelligence (AI) with demand increasing for the latest and smaller chips requiring more complicated manufacturing processes.
Governments and businesses must prepare for multiple scenarios by:
After several challenging years, semiconductor companies recognize the need to mitigate risks related to geopolitical and natural catastrophe exposures. Evolving to address a volatile environment, it is important to consider a wide range of strategies to avoid potential pitfalls. Partnering with experienced, strategic risk brokers and having access to cutting-edge analytical tools will help accurately assess risks and create winning solutions.
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