Semiconductor Supply Chain: Trends, Challenges, and Innovations

A semiconductor device, also known as an Integrated Circuit (IC) or chip, actually contains many smaller circuits comprised of millions of transistors, all packed onto a few millimeters of silicon. These semiconductor devices allow electronics to make computations, function, and operate. This makes them vital for modern electronics, with semiconductors being the fourth-most traded product in the world after crude oil, motor vehicle parts, and refined oil. Simultaneously, the demand for the semiconductor supply chain is increasing.

The demand for the semiconductor industry is anticipated to generate overall revenues of 556 billion US dollars in 2021 and 600 billion US $ by 2022. Industry giants such as Intel and Samsung Electronics are leading the charge in semiconductor chip production. In 2022, Intel boasted a semiconductor revenue of $58.4 billion, while Samsung surged ahead with $65.6 billion in revenue from semiconductor sales.

Furthermore, the industries fueling demand for the semiconductor industry include:

• Communication
• Automotive
• PC/ Computer
• Consumer

For instance, modern smartphones utilize semiconductor devices with many different smaller integrated circuits for different functions. For example, these modern chips can include the phone’s CPU, GPU, neural processing, and image processing cores.

The semiconductor supply chain is facing global issues such as the COVID-19 pandemic restricted China’s semiconductor sales with rest of the world, high demand from the automobile sector, high-interest rates and input costs are making the chip-making process all the more difficult.

An integrated semiconductor supply chain that involves thousands of companies and millions of people around the world forms the backbone of today’s digital economy, these issues not only exacerbate the global chip shortage but will also contribute to the global economic slowdown. The global digital economy is estimated to account for up to 22.5% of the global economy. US is imposing restrictions on chip exports to China, is like loosening an important link in the entire semiconductor supply chain. The US is concerned about China’s growing efforts to expand its influence over global economies.

To mitigate these challenges, players have incorporated various strategies such as expansion and partnerships to limit the effect of COVID-19 and strengthen their position in the industry. As semiconductor distributors control almost a quarter of the various industries’ revenues, they are a significant contributor to the semiconductor supply chain.

The semiconductor supply chain includes research and development, production, production inputs, and distribution to end-users. Research and development (R&D) is essential for all production, as it provides the inputs needed for success along with the trade/tariff regulations in the semiconductor industry that ensure fair and open global trade. The semiconductor production process can be divided into three main sections:

• Design,
• Manufacturing, and
• ATP (Assembly, Testing, and Packaging)

High demand for electronics, the Industrial Internet of Things (IIoT), government funding and investments, and technological advancement are the key factors driving the growth of this market. However, semiconductor chip shortages, long lead times, and price competitiveness are key factors hampering the growth of the semiconductor market.

In 2021, Taiwan Semiconductor Manufacturing Company (TSMC) invested $100 billion in expanding its chip fabrication capacity in order to meet the growing need for semiconductors over the next three years. The chip manufacturers are looking for potential in new raw materials other than the traditional ones. They are experimenting with new materials such as tin oxide, high-power gallium nitride, graphene, etc.

Dealing with chip shortage is the major challenge to work on, the companies are focusing towards redesigning of products to make them more resilient. The trend in the semiconductor industry is shifting towards making leading-edge chips. Semiconductor manufacturers are focusing on creating smaller node sizes as a path to success in addressing the chip shortage. Local governments are also actively investing in leading-edge technologies, as it requires large investments in R&D. Also, tax incentives are provided by the government to reduce operational costs.

The future of the semiconductor supply chain is exciting. It is witnessing new and innovative technological advancements in 5G, AI, smart factories, and automotive & quantum computing. The companies in the semiconductor supply chain are limiting the complications. They are empowering the technology of the present and the future.

The report covers:

• Supply Chain Analysis:
  • Semiconductor Supply Chain – Research, Production, Inventory, & Distribution and Outbound Logistics
  • Demand Analysis
  • Supply Analysis
  • Market Dynamics
  • Trade/Tariff Regulations
  • Technological Evolution
  • COVID-19 Impact on Supply Chain
  • Analysis of Macro-Economic Factors