Integrated Circuits Supply Chain Disruption

14 August 2023

Supply chain shortages predicted to lift through 2023 and into 2024. However, some IC shortages could linger as some chips remain more in demand than others.

Emerging from the IC chip shortages

The global chip shortage has affected numerous industries and consumers, revealing vulnerabilities and inefficiencies in the semiconductor ecosystem. Europe remains the weakest region for production post 2020-recovery, particularly compared with North America and China, where there has been stronger recovery. This is because Europe has been the hardest hit by semiconductor shortages and the Russia-Ukraine crisis. However, it's now expected to show the strongest growth rate globally by the end of 2023 as increased supply chain stability boosts momentum and should make this a stronger year across the board.

Chips with higher computing power in growing demand

As the automotive industry transitions to electric and autonomous vehicles, they require yet more chips, causing further strain on an already stretched industry. This set against a backdrop of new uncertainties which could impact production and logistics, including the economic effects of the war in Ukraine and unsettled trade dynamics between the US and China. Plus, the semiconductor industry is witnessing a slower transition to new nodes or the latest chip technologies due to increasing demand for chips with more mature nodes.

What if these ups and downs are the new norm?

Semiconductors have become increasingly pervasive, now serving as a fundamental component in nearly all commercial and consumer goods and equipment. The speed of chip demand and supply movements varies significantly due to inherent factors that are challenging to overcome. Demand, in terms of volume or chip designs, can rapidly and frequently shift. The semiconductor industry constantly witnesses advancements in chip design and capabilities. However, these innovations are now playing a role in intensifying and persistent supply chain volatility, because adjusting supply often lags behind demand changes as expanding capacity or reconfiguring production lines is a time-consuming process.

What will you do if supply chain imbalances are harder to predict and handle?

This turbulent period might signify the start of a permanent era of heightened uncertainty. Supply chain imbalances will be harder to predict and handle, necessitating proactive measures to stay ahead of instability. A series of structural industry shifts are amplifying supply and demand complexity, making uncertainty the new normal in the semiconductor industry for the foreseeable future.

How will you prepare for future shocks and crises?

Chip consumers must prepare for future shocks and crises, considering various factors like chip type, geography, disruptions, ESG, and technology advancements. Without a robust supply chain resiliency strategy, they risk being unprepared and facing significant consequences. To alter their trajectory, they need sustained commitment, inventory management, collaboration with manufacturers, geographical diversity, and continuous monitoring. Effectively preparing with strategic and tactical strength is crucial for a competitive edge in an unpredictable environment.

If you need semiconductors, you must avoid reactive approaches to handle demand and capacity fluctuations while waiting for better times. Instead, you should take proactive and protective measures to mitigate persistent volatility.

Providing scenario-based strategies for managing future chip crises

As a service provider, Whistler Technology understand the importance of responding with agility to any electronic component shortages. Our planning involves preparing for various outcomes and scenarios, incorporating near-term contingencies like demand changes, allocation shifts, and macroeconomic swings, as well as longer-term strategic plans such as inventory management methodologies, product positioning changes, and supplier relations. This comprehensive approach ensures our ability to navigate challenges and maintain a resilient supply chain for our clients.

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