RESILIENCE OF THE

SEMICONDUCTOR
SUPPLY CHAIN
DISCUSSION PAPER
2 Resilience of the Semiconductor Supply Chain
1 2 3 4 5

CONTENTS
Technology is all around us. From the visible to the invisible. CHAPTER 1
Introduction 3
And never has the power of technology been greater, not just to
CHAPTER 2
make things easier, but to make things better. It is the tool that
The driving force behind digitalization 4
enables us to shape our world and enriches our lives.
A complex, capital-intensive, and global supply chain 5
Pandemic-fueled demand for chips 6
Technology brings us together.
It connects us.
CHAPTER 3
Unprecedented expansion of manufacturing capacity 7
And these connections power innovation,
Construction challenges 9
foster creativity, and drive discovery.
Delivery of capital equipment and spare parts 9
Initial tooling andservice logistics 9
We know our partners operate in a dynamic and fast-changing market
and need to deliver the latest advancements around the world – safely, CHAPTER 4
reliably and quickly. This requires resilient and flexible supply chains to Futureproofing the supply chain 11
ensure that goods reach their destinations intact and on time. Acceleration of digitalization initiatives 12
Build stronger partnerships 13
We also offer multi-modal, specialized solutions to transport invaluable Develop resilient product and inventory strategies 14
machinery and precious parts, leveraging our own network that connects more Navigate to zero environmental impact  15
than 220 countries and territories globally. Technology connects people.
CHAPTER 5
Insights for chip manufacturers 16
Logistics connects the world.
Insights about increasing supply chain resilience 17
Connecting you.
3 Resilience of the Semiconductor Supply Chain
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CHAPTER 1 We are living in a fast-paced digital world in which chips

enable much of the technological development. A new
To satisfy the growing demand for chips, semiconductor
manufacturers are expanding and upgrading their production

INTRODUCTION version of an electronic device, such as a smartphone, is

often defined by the performance of the chip that powers
it. As the world digitizes, devices incorporate more and
cap­acity, investing $99 billion in fab equipment in 2022, almost
double the pre-pandemic rate ⁵. As we explore in Chapter 3,
this unprecedented expansion presents significant logistics
more sophisticated chips. Advanced passenger cars, challenges for all companies involved. Not least because it
for example, may contain 1,000 to 3,500 chips ¹. Future requires parallel construction of fabs in different regions,
developments, such as the growth of arti­ficial intelligence, some of which have little existing semiconductor production
autonomous driving, and industrial automation, are expected infrastructure. We explore the logistics implications of this
to drive this demand for chips even further. As a result, the extraordinary growth and the role logistics companies
semiconductor industry is predicted to achieve annual sales can play in supporting the construction process.
of US$1 trillion by 2030, up from around $600 billion today ².
The chip shortages of the last three years have also exposed
As we explore in Chapter 2, this development depends vulnerabilities in the supply chains of different industries.
upon highly complex supply chains. A small number of Beyond the chip shortage, pandemic-related disruptions to the
highly specialized companies are involved in each phase of transportation market, trade tensions, and the war in Ukraine
the chip manufacturing process. To keep up with the latest have impacted supply chains across the world. As a result, supply
technological developments, increasing investment in R&D chain resilience is high on the agenda everywhere. In a series of
and capital expenditure are needed. A new fabrication interviews with supply chain leaders from different industries, we
plant (‘fab’) for manufacturing the latest chip generation explore how these companies are increasing their supply chain
(sub-3 nanometers) is expected to cost up to $20 billion, for resilience and identify common themes that are applicable across
example³. As a result, chip manufacturers have an economic different sectors. In Chapter 4, we show how leading companies
incentive to run these factories close to full capacity. are using supply chain visibility, strong partnerships, smart
increases in inventory levels, and sustainability to improve their
While periods of over- and under-capacity are not unusual supply chain resilience. Additionally, we discuss the role logistics
for the semiconductor industry, pandemic-fueled demand for companies can play in this process. In Chapter 5, we summarize
devices exceeded the available manufacturing capacity. That key takeaways and recommendations from this document.
led to chip shortages which have impacted many industries
since the second half of 2020. Consultancy Deloitte estimates
that semiconductor shortages drove revenue misses of
more than $500 billion worldwide in 2020 and 2021, with
lost auto sales of more than $210 billion in 2021 alone ⁴.

AUTHORED BY
Alexander Gunde,
President Technology
Sector at DHL Customer
Solutions and Innovation

Boris Finselberg,
Global Lead DHL
Semiconductor
Logistics at DHL
Customer Solutions Peter Rolfes,
and Innovation Director Sector Development
at DHL Customer Solutions
and Innovation
4 Resilience of the Semiconductor Supply Chain
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CHAPTER 2 Semiconductors have now become so pervasive that it is

difficult to imagine life without them. The average American
Analysts at consultancy McKinsey & Company predict
average annual demand growth of 6 to 8% for the rest of the

THE DRIVING FORCE adult spends more than 12 hours a day interacting directly
with electronic devices 6. In 2022, Gartner expects sales of
current decade, with the semiconductor sector becoming a
trillion-dollar industry by 2030 2. Most of that growth will

BEHIND DIGITALIZATION
PCs, tablets and mobiles phones to reach 1.9 billion units 7. be driven by three sectors, McKinsey says: investments in
processing and data storage capacity needed to run emerging
Each of those products is likely to contain multiple AI-powered services; new generations of connected devices
semiconductor components, including processors, memory and the infrastructure needed to support them; and the
chips, wireless communication devices, sensors, and a collection radical changes underway in the automotive sector 2.
of simpler parts. Altogether, the global semiconductor
industry sold a record 1.15 trillion units in 20218. The sector’s Of those, it is the automotive industry that is
recent performance has been boosted by the coronavirus expected to be the biggest single source of
crisis, which increased demand for digital services, $1 growth for the semiconductor industry.
e-commerce infrastructure, and tools for remote working. trillion Today’s cars are already packed with
global semiconductor electronics, with between 1,000 and
The growth of the semiconductor industry revenue in 3,500 chips used to control multiple
2030
is expected to continue in the coming functions 1. The shift to electric powertrains
years, although progress may be bumpy. and the addition of advanced self-driving
By the middle of 2022, for example, features could result in an eight-fold increase
semiconductor demand had begun to in the semiconductor content of some vehicles. And the
slow in the face of lower consumer automotive sector’s share of total semiconductor demand
demand and as companies sought to
1,000 to 3,500 could rise from 8% today to as much as 15% in 2030 2.
cut their pandemic-era inventories. chips in every car

1.9
billion
PCs, tablets and mobile
phones to be sold
in 2022

GLOBAL SEMICONDUCTOR REVENUE, IN $ BN

1200
6-8%
1000

800
7%
600

400

200

2011 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Forecast 2022-2030

Source: Word Semiconductor Trade Statistics (WSTS), McKinsey, Gartner

5 Resilience of the Semiconductor Supply Chain
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A COMPLEX, CAPITAL-INTENSIVE, AND GLOBAL SUPPLY CHAIN

The semiconductor industry is one of the most globalized The completed wafers might then go to Malaysia where the The race to stay at the leading edge of chip technology has
industries in the world. The manufacture of a modern integrated individual chips are separated and packaged. Then they are driven extensive consolidation in the sector. In the 1990s,
circuit (IC) involves more than 1,000 separate processing shipped to China to be assembled into finished products around a dozen companies operated foundries capable of
steps, and 70 or more border crossings between suppliers and destined for customers anywhere in the world. producing the most advanced chips of the day. Today only three
service providers in a dozen or more countries. have that capability. These companies tend to concentrate their
Each major step along the semiconductor value chain is production in a few key geographical locations in

70
The journey of a chip might begin in the US, where silicon completed by highly specialized organizations, taking advantage the world. For example, 92% of global fabrication
To assemble
dioxide is mined and refined before it is shipped to Japan to be of know-how built up over decades. Different generations of capacity for the most advanced sub-10-nm a singe chip requires
border
melted down and grown into a giant single crystal called an semiconductor technology are often described by the chips is in Taiwan 3. The rest is in South Korea. crossings
ingot. That ingot might then be sliced into wafers in South approximate size of their smallest features, a dimension known These advanced factories are getting more
Korea, before being shipped to a foundry (fab) in Taiwan. At the as the ‘technology node’. This size has shrunk dramatically from expensive too. For example, TSMC’s most
fab, equipment from Europe is used to etch the circuits for
multiple chips onto each wafer, based on designs created by
around 50 micrometers (μm) in the 1960s to just a few
nanometers (nm) today.
advanced fab dedicated to 3-nm chips is
expected to cost as much as $20 billion 9.
1,000+
process steps
multiple US and European technology suppliers.

12
or more
countries

GLOBAL SEMICONDUCTOR VALUE CHAIN ECO-SYSTEM OF SEMICONDUCTOR MANUFACTURING

DESIGN WAFER PROCESSING ASSEMBLY & TEST FINISHED GOODS DC OR DISTRIBUTOR END CUSTOMERS

Integrated Device Fabless Semicon

1 Manufacturer (IDM)
2 Manufacturer

1
3 3
3
2 4 4
5 4
9
8
6

7 Water RDC / FSL

Manufacturer

Raw End customers

5
(Technology,
Materials Cross Dock Manufacturing,
Automotive)

Supply Center
Foundry (RDC / GDC)
1. A UK firm licenses the IP on application process architecture 6. The wafers may be shipped to fabs in Taiwan and turned into
integrated circuits
2. A US-based fabless firm designs the chip
Assembly
7. Individual chips are separated and packaged by an Assembly & Design & Testing Distributor
3. Highly advanced manufacturing equipment is developed
Testing in Malaysia (A&T) 6 7
by companies in the US, Europe, or Japan
8. The chip is shipped to the smartphone OEM’s assembly
4. Silicon dioxide is mined and refined in the US and sent to Japan to be
partner in China, to be incorporated into a circuit board inside the Capital
melted down and grown into a giant single Equipment /
crystal called an ingot
phone
Spares 3
9. The smartphone is sold to a customer in the US
5. That ingot might then be sliced into wafers in South Korea

Source: Semiconductor Industry Industry Association (SIA), Boston Consulting Group (BCG): Strengthening the Global Semiconductor Supply Chain in an Uncertain Era
6 Resilience of the Semiconductor Supply Chain
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PANDEMIC-FUELED DEMAND FOR CHIPS

COVID-19 boosted demand for many electronic devices. The capital-intensity of the semiconductor industry means that To overcome its supply challenges, the semiconductor sector is
For example, demand for PCs and laptops saw its highest chipmakers try to run their plants as close to full capacity as embarking on significant changes to its value chain. Upstream,
growth rate in ten years, fueled by working from home and they can, with little headroom for unexpected spikes in demand. chipmakers are making unprecedented worldwide investments in
home schooling 10. In 2020, demand for semiconductors Utilization has been consistently high (at or above 80%) in new manufacturing plants designed to boost overall capacity and
exceeded pre-COVID forecasts in almost every major the past decade. In 2020, it was close to 90%, effectively full reduce the risks associated with the geographical
sector except automotive and industrial applications. utilization given the need to maintain equipment and switch concentration of critical facilities. Downstream,
production lines between different product types 11. Additionally, semiconductor users are adapting their supply
While demand was booming, delivering finished products as it takes at least 24 months to set up a new fabrication facility, chains to boost resilience by securing the
to end customers was difficult. The collapse of passenger air supply and demand in the semiconductor sector can get out of long-term availability of critical products
travel removed significant air cargo capacity from the global sync. In the past, this has resulted in periods of under capacity and buffering smaller cyclical changes
market since much air freight travels as belly cargo on scheduled followed by periods of increased investment to satisfy the in demand and supply patterns. PC sales growth
reached a
passenger flights. Additionally, congestion at major seaports – growing demand.
especially in the US – compounded ongoing air freight shortages. TEN-YEAR HIGH
Growing demand and limited supply of chips led to during the pandemic
But the semiconductor sector’s challenges did not end when shortages in 2021 and 2022. Problems appeared first in
pandemic restrictions eased. Companies in the automotive the automotive industry but soon spread to other sectors.
sector, for example, had been quick to cut their orders for Multiple automotive companies were forced to close plants
semiconductor products as demand fell. Semiconductor and adjust production plans because they couldn’t get the
manufacturers then allocated production capacity to other semiconductors they needed. Analysts at Deloitte estimate
customers, such as consumer electronics manufacturers. When that the chip shortage of the past two years resulted in revenue
vehicle sales recovered rapidly after the crisis, semiconductor misses of more than $500 billion worldwide between the
manufacturers lacked spare capacity to fulfil the resulting surge semiconductor industry and its customer industries, with
in new orders. And even where they did, extra time was needed to lost auto sales of more than $210 billion in 2021 alone 4.
switch factories back to the production of automotive products.

SEMICONDUCTOR SALES IN 2019 BY APPLICATION FORECASTED VS. ACTUAL SALES GROWTH IN % (2020)

$ billion¹ Pre-COVID-19 forecast⁴ Actual sales growth

Wireless communication² 127 +6

PC 67 +11

Storage GPU³, peripherials 52 +7

-3
Industrial 49
-16
Automotive 41
+15
Consumer electronics 38
+2
Server 29
+6
Wired communication 25

0 25 50 75 100 125 150 -10 -5 0 5 10 15 20

¹Products include memory, microcomponents, logic, analog, discrete, optoelectronic, and sensors/
actuators. ²Includes Chinese inventory effect; growth rate without inventory expected to be -4 to
-8 %. ³Graphics processing unit. ⁴As of December 2019. The estimates for 2020 were calculated
using a 2019 baseline, and percentages have been rounded.
Source MckKinsey, IHS, Strategy Analytics
7 Resilience of the Semiconductor Supply Chain
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CHAPTER 3 With much of its existing manufacturing infrastructure

running at close to full capacity, the semiconductor industry
These incentive programs are already beginning to reverse
some of the recent geographic concentration in the sector.

UNPRECEDENTED is embarking on a significant wave of capital investments to

satisfy growing demand for chips. Constructing a new foundry
Intel, Samsung, and TSMC have all announced plans for
advanced semiconductor plants in Europe and the US, for

EXPANSION OF
capable of etching the smallest transistors on the largest example. These new fabs are likely to encourage players
wafers can cost more than $20 billion 3 and take two years or from other parts of the semiconductor value chain to set
longer. The big chipmakers must also invest billions of dollars up nearby, including suppliers of raw materials and capital

MANUFACTURING CAPACITY every year to update and replace manufacturing equipment in

their existing plants. Total capital investment by the sector is
expected to be more than $99 billion in 2022, almost twice the
equipment, R&D, and assembly and test organizations.

In recent months, the pace of capacity expansion has slowed

$55 billion investment made in 2019 5. a little. Some manufacturers have reduced their planned
investments for 2022 and target completion dates for some
This latest investment surge is a worldwide phenomenon. new fabs have been pushed back. These delays are being driven
As ongoing shortages highlight the strategic importance of by a combination of factors, including a slowdown in consumer
semiconductors, governments in many regions are enacting demand, delays in the approval and distribution of subsidies, and
policies designed to support the development of local shortages of critical capital equipment. Nevertheless, growth
production capacity. The US CHIPS for America Act, for example, in the industry remains robust and is expected to continue.
includes a $52 billion provision for investment in semiconductor
research, design, and manufacturing. The EU’s European Chips
Act offers a bundle of incentives designed to encourage the
construction of new manufacturing facilities in the region.

“In the past we were building

in a timely sequence – one after
finishing the previous – but now
we are building multiple
superfabs at the same time.”
Rory P. O’Connor, Vice President
Global Logistics, Intel
8 Resilience of the Semiconductor Supply Chain
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PLANNED EXPANSIONS OF
SEMICONDUCTOR MANUFACTURING CAPACITY

Geographical hotspots marked in yellow

Taiwan Texas (US)

Taiwan South Korea

China
OH, TX, OR (US)
DE, FR, IE, IT
PL, ES (EU) Japan
Malaysia
Israel

Japan, Taiwan
Arizona (US)
India
Texas (US)
India Germany
Vietnam
Texas (US) Japan
Indonesia Texas, Idaho (US)
Malaysia India
Hungary

Singapore India
Malaysia

New York (US)

Texas (US) Singapore
France

Malaysia Japan

Malaysia
France
Italy

Japan
Japan

Texas (US)
China

Arizona
Japan
Texas (US)

Source: public announcement of semiconductor companies

9 Resilience of the Semiconductor Supply Chain
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LOGISTICS STEPS ACROSS FAB CONSTRUCTION PROCESS

DELIVERY OF CAPITAL EQUIPMENT
AND SPARE PARTS
Delivery of capital Initial tooling
Construction site At the heart of every semiconductor fab are the expensive and
equipment and & service
highly specialized machines used to etch the transistors and
spare parts logistics
other components onto silicon wafers. These machines are
produced by only a handful of companies worldwide.
Special International and Staging or warehousing At the moment, just one company – ASML of the
Equipment domestic of finished goods service

40
Netherlands – manufactures the most advanced
transportation logistics Shipping
extreme ultraviolet (EUV) equipment needed containers
to produce today’s most advanced chips.

20
Engineering and
Ad-hoc deliveries
transport design Trucks
The limited availability of capital

3
equipment is a significant challenge Boeing 747
Site requirements to today’s wave of fab construction. cargo aircraft
The equipment for each chip production
to move all its components of most
line takes several years to manufacture advanced EUV machine which
and requires thousands of components from contains 100,000 parts
highly specialized suppliers. ASML reports that
it shipped only 42 EUV systems in 202112.

CONSTRUCTION CHALLENGES Transporting the machines from factory to fab is also a challenge.
Large capital projects are notoriously difficult to complete At greenfield sites, semiconductor companies and their The most advanced system requires 40 shipping containers,
on time and on budget. For the semiconductor industry, suppliers need to establish significant new logistics capacity 20 trucks, and three Boeing 747 cargo aircraft 13 to move all its
the current surge in activity will be especially challenging. to support construction activities. That means new multi- components. And once all that equipment is in place at a new
The construction of multiple facilities in parallel will place modal transportation capabilities, including air, sea, and site, the process of assembly, test, and setup can take several
additional loads on project planning, project management, road freight, as well as warehouse space for the staging and months. This is followed by a further ramp up period as the line is
and project delivery resources, and some of this activity will preparation of equipment prior to installation. Demand for equipped with tooling for specific products and the fab operator
take place in geographical areas where there is no established warehousing near semiconductor facilities is optimizes its production and quality control processes.
ecosystem for advanced manufacturing for sub-5-nm particularly acute, competing for the same space. During these critical early phases of production,

24+
chips (e.g., in the US state of Ohio, equipment and tooling suppliers will work closely
and in France and Germany). The volume and variety of logistics activities with the fab, and they must have access to a
Months duration required during the construction of a major comprehensive local supply of spare parts
Efficient and well-coordinated $20 of new fab
construction
semiconductor facility can be formid­able. and equipment to support their customers.
logistics is a critical element of
any major construction project.
billion: One recent mega-fab project, for example,
involved almost 28,000 square meters of dedicated
Cost of the most
For semiconductor plants, the warehouse space and an additional 60,000 square
products and materials that must
advanced fabrication
plants (fabs) meters of yard space. These facilities can handle almost 13,000
INITIAL TOOLING AND
be delivered to the site fall into separate shipments, ranging in size from 2-kg parcels to 50-ton
SERVICE LOGISTICS
three broad categories. First, there are items of capital equipment delivered on chartered ships. On During the operating life of a fab, equipment
commodity items such as concrete or average, 20 heavy or oversized items, outside the sizes of items providers will remain on hand to support, maintain,
steel beams. Second, there are general industrial products such transportable by standard equipment, can be delivered every and repair their equipment. The service level agreements
as chillers, storage tanks, and gas handling equipment. These week. Each of those movements requires detailed planning and between suppliers and customers are stringent, with response
may be sourced from local, regional, or global suppliers and may the use of cranes and other specialist handling equipment. times measured in minutes or hours rather than days. To deliver
be large, out-of-gauge items that need specialist transport assets that level of support, equipment makers will hold spare parts
and handling equipment. Finally, there is the highly specialized inventories at forward stocking locations or warehouse facilities
equipment used to make the chips. This consists of delicate, close to the customer. Suppliers face significant competition for
high-value items that require extremely careful handling. the critical warehousing locations close to newly constructed
fabs, which tend to be in short supply. They also require rapid and
efficient transport links back to their home operations.
10 Resilience of the Semiconductor Supply Chain
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“FIT-FOR-PURPOSE” COMMERCIAL AND OPERATIONAL LOGISTICS MODELS

An integrated, flexible end-to-end approach with a strategic set of services for construction projects based on site,
project type and customer segment
THREE QUESTIONS FOR
LOGISTICS SERVICES BORIS FINSELBERG, GLOBAL LEAD
■

■
International and domestic transportation
Special equipment
■

■
Air Freight Carriers
Ocean Freight Carriers
DHL SEMICONDUCTOR LOGISTICS
■ Staging or FG / SL warehousing ■ Road Special Equipment Providers
■ Project management, CT / LLP and VAS ■ Warehouse Providers
What are the key challenges in fab construction on track during project execution. Finally, a big part
from the logistics perspective? of the challenge in global projects like these is the
OPERATIONAL SUPPORT
In any big construction project, being on time and on need to manage multiple vendors of logistics
■ Engineering and transport design
■ Ability to provide labor / HR budget is always the big chall­enge. Fab construction services. That’s something that specialist logistics
■ Site requirements
T
 raining, safety and permitting management
is especially complex, with many construction service providers do every day.
■
■ Vendor management
■ IT systems
phases, numerous moving parts, and the need to
COMMERCIAL STAKEHOLDER MANAGEMENT coordinate many different logistics For semiconductor construction projects,
processes within tight time win­ what are the key requirements you

€
■ Menu of Services ■ Transport Management
■ O
 wner or Contractor Furnished and ■ Warehousing dows. And right now, the industry should look for in a logistics service
Contractor Installed Equipment ■ LLP / Control Tower faces the added complication of provider?
■ S
 takeholder / Contact Matrix Trade Compliance
running multiple major An experienced provider should be
■

projects simultaneously able to offer access to the right

around the world. That’s assets, including a global
putting additional pressure transport and warehouse
on suppliers, and on the network and sufficient
logistics resources and infrastructure for direct site support.
HOW LOGISTICS CAN CONTRIBUTE
expertise needed to execute They should also be able to
Logistics service providers play multiple Another area of increasing relevance at many new these projects. demonstrate that they have experienced
critical roles in the construction and semiconductor facilities is the provision of warehouse space
people, from the frontline project team to
operation of new semiconductor plants. and related warehouse operations. With land close to large
Where can logistics improve the the wider global organization and its
As well as providing transportation plants in such high demand, industry suppliers are looking for
capabili­ties, logistics companies are flexible ways to manage their warehousing needs through the efficiency of project delivery and add value? management. Finally, there’s the question of
increasingly taking on coordination and project lifecycle. That might involve using the same facility as a First, a specialist logistics provider will typically offer culture; a good provider must be willing to engage
project management roles during construction. They may work staging location during construction and for the storage of the most cost-efficient solution. Logistics is their early and take a collaborative approach that focuses
with the plant’s owner and main contractor to coordinate and tooling and service parts during ramp up and operation, for core competence, and they will offer a range of on finding the best solutions to complex logistics
execute purchase orders and inbound shipments of equipment example. Logistics service providers are well placed to assist in
different engagement models to suit the problems.
and materials, for example. Or they may operate warehouse the construction and management of this warehouse space,
requirements of each project. Second, an
and yard facilities on their behalf. Logistics companies are also and the provision of shared warehouse space can enable the
using their technology skills to provide supply chain and efficient and cost-effective allocation of space between experienced provider can assist with logistics
inventory management capabilities, for example by operating different value chain participants. planning and coordination, and they can offer project
supply chain control towers or acting as the lead logistics owners the transparency they need to keep things
provider (LLP) for these projects.
11 Resilience of the Semiconductor Supply Chain
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CHAPTER 4
FUTUREPROOFING
“We are moving away from a world of availability
(of materials) to a world where we need

THE SUPPLY CHAIN

to manage the scarcity of materials”
Jean-Francois Salles, Vice President Global Supply Chain,
Renault-Nissan-Mitsubishi (RNM) Alliance

“At the end of this decade, our supply chain

will look different compared to what
we are doing today.”
Peter Dressler, Vice President Logistics, Infineon

In time, newly constructed fabs will ease today’s chip To better understand how companies are adapting their
shortages and the transport market will recover. Only a few supply chains, we conducted interviews with supply chain
in the industry believe that the latest wave of disruptions will leaders from different sectors, including the automotive,
be the last, howe­ver. Having learned some difficult lessons consumer electronics and semiconductor industries. During
during the pandemic, supply chain managers are now making these interviews, we identified multiple approaches that these
wide-ranging changes to increase flexibility and resilience. companies are using to futureproof their supply chains.

While each industry is different and each company has

its own supply chain resilience strategy, our interviews
highlighted a few key themes, which we believe are
applicable across industries: accelerated digitalization, a
focus on stronger partnerships, the development of resilient
product and inventory strategies, and targeted efforts to
Resilient product reduce the environmental impact of the supply chain.
and inventory
strategies
These four themes are each significant in their own right;
furthermore, we observed interlinkages between them.
Digitalization is not only a key focus area for many
companies but also an enabler for other areas: enabling
Accelerated Build stronger a more resilient supply chain through improved visibility
digitalization partnerships and insights, for example, and aiding reduction of the
overall environmental footprint by revealing the sources of
emissions and identifying network inefficiencies. Additionally,
Reduce
having strong partners is a key element of a resilient product or
environmental inventory strategy as companies that can rely on their
impact supply chain partners don’t need to maintain such high
inventory levels. Last, every supply chain design decision
and every logistics activity has an environmental
impact and companies need to consider these choices
in the context of their wider sustainability goals.
12 Resilience of the Semiconductor Supply Chain
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ACCELERATION OF
DIGITALIZATION INITIATIVES
Knowledge is power in the supply chain. When participants The data companies collect from their suppliers, customers,
know exactly what is happening, or about to happen, in and logistics providers is becoming increasingly granular too.
their supply chains they can make faster, more effective One of the interviewed companies is investing in telematics
HOW LOGISTICS CAN CONTRIBUTE
operational and strategic decisions. Even before the systems with GPS trackers so it can see the precise, real-time Logistics players can assist the supply
pandemic, many organizations were working to improve location of critical inbound components while they are in transit. chain data revolution in several
the flow of information across their supply chains using ways. First, they can provide timely,
digital tools. Those efforts have now gone into overdrive. That sort of rich data enables the creation of much more detailed, detailed data on the status of
dynamic models of the supply chain. Leading companies are shipments, inventories, and transport
For most organizations, transparency begins at home. Supply now applying advanced analytical tools, using simulation assets. Additionally, they can provide
chain managers told us that accelerated digitalization was a top systems such as ‘supply chain digital twins’, for example, to information for critical shipments such as GPS location,
priority during the pandemic, second only to the operational derive valuable operational and strategic insights. They use temperature, and shock measurements and more
challenge of keeping supply chains flowing amid large-scale these systems in scenario planning to identify potential sources detailed visibility into warehouse operations. Leading
disruptions. Companies have increased their investment of disruption and evaluate different mitigation and response providers already run their own operations on advanced
in digital tools to track orders, production processes, and strategies. They are also analyzing data in real time to spot digital platforms, allowing them to make customer- “In 2019, supply chain visibility
inventories. A big focus for many interviewed companies was problems early and trigger appropriate responses. Additionally, specific data available via appropriate interfaces. was a nice-to-have. In 2022,
the integration of data from multiple systems across different these digital tools can help companies to better predict Those providers can also offer platforms that help supply chain visibility has become
geographies, legacy systems and external partners. One key product demand, define suitable inventory levels, and optimize their customers achieve greater visibility and derive
lesson of the recent disruptions is that knowing the status of transportation networks to reduce emissions and costs. new insights from logistics data. Additionally, logistics
a must-have.”
your direct (Tier 1) suppliers is no longer enough. Companies providers can combine visibility of multiple transport Peter Dressler, Vice President Logistics,
also need to understand the situation far upstream in the Finally, digitalization and automation can also increase modes into one overview, making it easier for companies Infineon
supply chain, allowing them to spot potential problems much the efficiency of logistics operations, for example through to switch between different transport modes.
earlier, especially for the key Tier 2, 3, and 4 suppliers. Many implementation of warehouse robots. While very few
companies are trying to improve visibility of the inventory expect or aim for dark warehouses without any workers Moreover, the logistics sector has been investing in
levels of their suppliers to better assess the overall robustness in the foreseeable future, usage of robots and increased advanced analytical capabilities, for example to optimize
of their supply chains. And as supply chain decision-making warehouse automation can support with labor shortages its own operations. Leading logistics players are now
becomes ever-more reliant on rich digital data, organizations and support warehouse workers with repetitive tasks. extending these offerings into the broader supply chain,
are striving to improve the accuracy and speedy availability of helping customers find smart solutions for operational
that data. For one of the interviewed companies, a big focus challenges, improve the design of their logistics networks,
has been achieving a consolidated overview of the supply and optimize inventory levels for their warehouse
chain ready at the touch of a button. Many of the supply chain operations.
managers we interviewed consider digitalization to have been
a key enabler of agility and resilience during the pandemic and Logistics providers can also provide direct
an area which has been accelerated in the past two years. operational support to their customers, for
example by running supply chain control
Some companies are now establishing dedicated control towers on their behalf. These control
towers to monitor and manage their integrated, digitalized towers can provide the customer
supply chains. With a clear view of the end-to-end supply with a consolidated overview of all
chain, these control towers provide a range of levers at the their transport operations, integrating
user's fingertips to help companies overcome shortages and “We need to get much better data from different suppliers.
delays. They can facilitate expedited transport of critical
understanding of our
parts, for example, and pull inventory from alternative Finally, logistics providers can offer
warehouses or production locations, shipping from
supply chain at Tier 2, 3 and 4 level.” automation solutions, for example through
anywhere to anywhere to ensure orders are fulfilled. Jean-Francois Salles, Vice President Global Supply Chain, implementation of warehouse robots.
Renault-Nissan-Mitsubishi (RNM) Alliance
13 Resilience of the Semiconductor Supply Chain
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BUILD STRONGER PARTNERSHIPS HOW LOGISTICS CAN CONTRIBUTE

Logistics service providers have
When products, materials, and services are readily available, when there is high demand. Another company mentioned the
become important strategic
companies may pursue transactional relationships with importance of understanding how customers are going to use
partners in today’s semiconductor
their suppliers, driven primarily by cost considerations. In a their products (standard ‘off-the-shelf’ or customized products)
value chains. As elsewhere,
world of scarcity, uncertainty, and disruption, however, many to set up their own production and operations efficiently.
companies are moving away from
organizations are recognizing the benefits of closer, more
the traditional transactional approach
collaborative relationships and strategic partnerships. At the In the automotive industry, for example, original equipment
to the procurement of logistics services and towards
same time, it is important to recognize the risks of being overly manufacturers (OEMs) and their suppliers used to plan their
long-term relationships with their chosen providers.
dependent on a single provider or supplier. production independently, based on each OEM's
Companies are looking to diversify forecast, which was then adjusted a few times
By engaging logistics providers early and sharing forecast
their supplier networks where a year. During the pandemic, this approach
data regularly, companies can ensure that the transport
possible, while keeping strong proved problematic. At the beginning of
“Collaboration between capacity they need is available when they need it. That
relationships with key suppliers. the crisis, OEMs cut their sales forecasts
and their suppliers reduced their industry players will drive is especially important for lanes where capacity is
currently constrained, such as major air and sea routes
In some sectors, for example semiconductor order volumes in a competitive edge.” during seasonal peaks, or the provision of specialist
consumer electronics response. When sales bounced Rory P. O’Connor, Vice President equipment for the handling of capital equipment.
or semiconductor back from pandemic-era lows, Global Logistics, Intel
manufacturing, strong the semiconductor supply chain
Some companies in the sector are pursuing higher
relationships with was unable to meet industry
levels of integration with their logistics providers,
key suppliers and demand. Across the sector,
giving those providers responsibility for activities
partners have always manufacturers were forced
that were once handled in house. Under this logistics
played an important role. to temporarily remove features
support service model, the provider may run supply
Production campaigns for from their vehicles and to even close
chain control towers on behalf of its customer, for
short-lifecycle products, such production lines. To avoid a recurrence
example. Or the provider may operate warehouses
as mobile handsets, require of these problems, automotive OEMs are
for inbound materials and finished products.
precise synchronization across now shifting to a more collaborative model,
the end-to-end supply chain. developing a joint forecast with suppliers and
The scope of logistics partnerships is becoming broader
Participants may have just a few placing firm chip orders for the upcoming year.
too. While many semiconductor players manage their
months to establish new supply chains
logistics activities around specific sites or value chains,
and manufacturing lines, and they need Collaboration within organizations is becoming
some are now creating globally integrated networks
to reach a full production rate in weeks. That can only happen if more critical too. During the pandemic, many organizations
with centralized management and a small number
semiconductor suppliers, consumer electronics manufacturers, relied upon close collaboration between different functions, for “Strong relationships with our of strategic provider relationships. This approach
and logistics service providers are collaborating effectively. example cross-functional sales and operations planning (S&OP)
teams to coordinate their response to the crisis. That approach is
key suppliers play an can boost resilience, for example when companies

One consumer electronics manufacturer we interviewed set to become the norm. When supplies are limited, for example, important role in our resilience supply the same products from multiple production
locations, run several simultaneous construction
highlighted the importance of strong relationships with its manufacturing and supply chain teams need to work closely strategy and increase projects, or seek to replicate best practice supply chain
own suppliers, such as chip manufacturers to be able to secure with their sales and marketing colleagues to manage customer
the flexibility of our operations.” management across facilities in different regions.
critical delivery of chips in times of supply chain scarcity. expectations, maintain service levels, and protect margins.
This sometimes goes beyond firm order commitments to Russell Shimp, Executive Director, Lenovo
include prepayment to secure necessary production capacity
14 Resilience of the Semiconductor Supply Chain
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DEVELOP RESILIENT PRODUCT

AND INVENTORY STRATEGIES
For decades, companies have pursued a ‘less-is-more’ approach One consumer electronics manufacturer we interviewed decided
to inventory. Stock on the shelves ties up working capital and to keep a stock of finished products to guarantee delivery to its
incurs storage costs. In fast-moving markets, large inventories key customers, for example. Vendor-managed Inventory (VMI)
HOW LOGISTICS CAN CONTRIBUTE
risk becoming obsolete before they sell. A policy of low stocks and strategies allow customers to benefit from guaranteed service Logistics service providers can support
high inventory addresses these problems, and just-in-time models levels at their production sites without the cost and complexity the semiconductor sector’s changing
have become accepted best practice in some sectors. Automotive of owning and managing inventory before it is required. approach to inventories and product
assembly plants, for example, store only the components they design. They can offer organizations
need for a few days or even just a few hours of production. Horizontal collaboration between industry players also offers the extra warehouse capacity they need
potential benefits. Flexible, shared warehouse space close to for additional safety stocks, for example.
“As result of past supply chain
However, lean inventory strategies are vulnerable to volatile a large customer provides a cost-effective way for multiple Additionally, logistics providers can offer more flexible
demand and disruptions in supply. And the COVID-19 crisis and
disruptions, we decided to suppliers to ensure availability of components and spare fulfillment setups such as using one forward-stocking
subsequent bumpy recovery have exposed many industries to increase our inventory levels parts, for example. Some semiconductor industry groups are location to support multiple manufacturing points, and
both. Now organizations are reassessing their inventory policies, from 90 to 120 days” also exploring the potential of ‘strategic reserves’ of critical offering networks of smaller warehousing locations
aiming to improve their resilience to unexpected events. Larger inputs, such as wafers and gasses, which could be accessed by strategically placed across different countries to give
Senior supply chain director,
‘just-in-case’ safety stocks are becoming common across consumer electronics manufacturer multiple fabrication plants in the event of supply disruption. customers more flexibility.
industries.
Logistics organizations can use their analytical expertise
While inventory targets for both components and finished goods to help customers fine-tune inventory targets, and help
have risen across supply chains, companies we spoke to are using them decide how to best allocate inventory across diff­erent
different inventory management approaches. Some have taken a Some companies are pursuing a similar strategy by increasing warehouses. Logistics partners can
blanket approach, increasing the target inventory levels to three, the use of common – often more advanced – chips that also run VMI programs, high-speed
six, or even nine months. Other companies are improving their are shared by multiple end products rather than using a service logistics operations, and
applied analytics models to help determine the right inventory different chip for each device across the product portfolio. similar activities on behalf
levels for different components, based on historical and forecast Automotive subsystems for different classes of vehicle may of their customers.
demand, ease of resupply, the costs of the component and its share identical hardware with different software features, for
storage, and the riskiness of the upstream supply chain. That example. Additionally, some of the interviewed companies
means that inventory targets for the same component can vary are looking at reducing the overall number of chips used in a
between different warehouses in different locations due to single device, again by using more advanced chips. At a higher
differences in ease of resupply. One company we interviewed cost per chip, this allows them to simplify the supply chain.
has shifted its whole approach to inventory optimization. Rather
than setting targets to keep inventory costs to a minimum, It improves long-term availability as well. A typical car
it now links its inventory goals to its orders and demand manufacturer plans its models numerous years into the future.
forecasts, with the aim of maximizing manufacturing output. For safety reasons, all components and chips need to be properly
tested and substituting a different chip is not easy. Reducing
Product and portfolio simplification is another way to improve the number of different chips, and favoring more advanced
resilience without increasing overall inventory levels by models, helps companies to ensure that their preferred products
reducing the diversity of components purchased. During the will remain in production for the life of the vehicle program.
corona­virus crisis, for example, some automotive companies
rationalized their offerings so that limited resources could be As companies seek to improve resilience while keeping
focused on a smaller range of products. While the features inventory costs down, there is growing interest in the use of
removed from vehicles were primarily sound-system and collaborative approaches. Customers and suppliers may agree
infotainment components, some companies temporarily to share information on their inventory levels, allowing the
stopped offering certain advanced safety features too. optimization of stock levels in their respective supply networks.
15 Resilience of the Semiconductor Supply Chain
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NAVIGATE TO ZERO
ENVIRONMENTAL IMPACT
Most major companies are now committed to the target Switching from carbon-intensive air freight to rail or ocean
of net-zero greenhouse gas emissions by the middle freight is one option, if the supply chain is set up to handle
of the century, and some want their supply chains to the longer transport times required. That approach works
become carbon neutral by as early as 2030. Additionally, well for less time-sensi­tive, build-to-stock products and
a key focus of many interview participants was not only lower-value commodity items. One company we interviewed
reducing the carbon emissions but also the environmental uses ocean freight for recovering transport packaging and
impact of manufacturing processes, including reducing customer-returned products to its own facilities, even at the
the use of water, chemicals, and virgin materials. cost of slightly longer lead times. Another area of focus is
the optimization of packaging. Much of the packaging used
Some companies are looking at refurbishing used products, across the semiconductor supply chain is single use, incurring
reusing parts of products which cannot be refurbished, for significant financial and environmental costs.
example for product repair, recycling materials recovered “We need to make our supply In the case of large capital equipment used in
from end-of-life products, and safely disposing of any semiconductor foundries, for example, the cost
remaining materials. These steps have both environmental
chains more efficient and of the single-use crates required to protect
and economic advantages, as companies can reuse existing less emissive at the same time.” machines in transit can equal the cost of
parts and materials instead of producing them new. Jean-Francois Salles, Vice President Global Supply Chain, shipping them. Switching to reusable
Renault-Nissan-Mitsubishi (RNM) Alliance containers for this application could cut
While transport- and warehousing-related emissions logistics costs dramatically, and the
often represent only a small part of the overall emissions right designs would also improve
of the interviewed companies and their suppliers, many protection and simplify handling.
companies mentioned that their sustainability targets
became additional KPIs for their supply chain operations.
HOW LOGISTICS CAN CONTRIBUTE
To reduce emissions, companies first need to understand Logistics players can support
the source of the emissions. That is no trivial task, especially their customers’ sustainability
for such complex, global supply chains often spanning initiatives in several important
different continents and multiple transport modes. ways. First, they can fill the
information gap by providing data on
The first step towards reduction of the overall demand emissions related to transportation
for transportation is optimizing the transport network. and warehousing. Second, they can help those customers
One of the companies we interviewed aims to reduce road minimize the impact of both new and existing supply chains
transport-related emissions in its supply chain by as much by optimizing routes, loads, and transport modes. Third,
as 30% by better optimizing its transportation network and they can help to identify quick-win areas where emissions
sourcing. Many companies are aiming to source materials can be reduced without significant additional cost.
and components (whenever possible) more locally.
Logistics and transport companies are also investing in
Where products, components, and materials do need to sustainable technologies from electric trucks and zero- “At Google, our goal is to achieve
travel, they will need low or zero carbon way of doing so. emissions warehouses to low-emission fuels for ships net zero emissions across
Several companies we interviewed are already exploring and aircraft. Logistics companies can collaborate with
changes in their logistics practices designed to minimize their customers to develop new closed-loop logistics
all of our operations and value
emissions, for example by using electric vehicles for last-mile chains for reusable packaging and end-of-life product chain by 2030.”
deliveries and alternative fuels, such as sustainable aviation recovery. Additionally, logistics companies can support Carolin Seward, Vice President of Custom Silicon
and maritime fuels (SAF and SMF), LNG and hydrogen. customers' circular economy initiatives, for example by Sourcing and Operations, Google
providing product repair and refurbishment services.
16 Resilience of the Semiconductor Supply Chain
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CHAPTER 5
KEY TAKEAWAYS
INSIGHTS FOR CHIP MANUFACTURERS
The last three years have highlighted the importance of the
semiconductor industry. First the coronavirus crisis drove a HOW LOGISTICS CAN CONTRIBUTE
spike in demand for many product categories. Then the rapid TO FAB CONSTRUCTION
post-crisis economic recovery created additional demand
pressure in a value chain that was already operating at full
capacity. The resulting component shortages, price increases, n Define the scope of work during the construction phase
and long lead times have adversely affected semiconductor and initiate the development of an operational business
customers in multiple sectors. Now the industry – and its model for logistics processes with the project owner
customers – are striving to increase manufacturing capacity and the assigned construction company
and improve the resilience of supply chains, applying lessons
learned during the pandemic to build systems that can n Offer network and bespoke solutions for transportation
mitigate shocks and support sustained long-term growth. of capital equipment, out-of-gauge products, wafers,
and finished goods
Chip manufacturers are making significant investments in new
production facilities, aiming to increase overall capacity and n Support inventory concepts and warehousing /
reduce the geographic concentration of critical production laydown solutions for efficient supply chains and
capabilities. All major chip manufacturers are currently in the resilience
process of constructing multiple fabs in different geographies
across the world. Construction of a single fab has always been a n Foster transparency across the entire ecosystem
challenging, expensive, and time-sensitive process with multiple through digitalization of the logistics process and tier-n
moving parts, and a single delay can have a cascading effect on supplier engagement
the whole project. The simultaneous construction of so many
fabs in so many places significantly compounds this complexity. n Offer commercial models which support the diff­erent
parties in the ecosystem, for example aligned
Logistics companies can add value by playing a more active incoterms, payment terms, and rate management
role across the multiple stages of the process, including the
construction phase, the end-to-end manufacturing process, and n Facilitate collaboration between different parties and
final distribution of semiconductors. A logistics provider can contribute to the achievement of customers’
support and add value at every different stage of the process. sustainability targets
17 Resilience of the Semiconductor Supply Chain
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INSIGHTS ABOUT INCREASING SUPPLY CHAIN RESILIENCE

Companies that use semiconductors in their products, helped us identify several critical areas of focus. While each
meanwhile, are rethinking their supply chains to make them industry and the approach of each company is different,
more resilient. Our conversations with leading players from we believe that these themes are universally applicable.
across the end-to-end semiconductor value chain have

Develop resilient
product and
inventory
strategies

5. Reduce complexity in product

design and inventory systems

6. Smartly adjust inventory

levels to achieve an
additional level of resilience

Accelerate
digitalization Build stronger
initiatives partnerships

1. Increase transparency about the entire 3. Invest in stronger relationships

supply chain, which stretches beyond with key partners and suppliers
own operations and key suppliers
4. Foster active collaboration
2. Leverage digital tools to create better between different internal
insights and enhance decision-making functions

Reduce environmental impact

Have transparency about
FOOTNOTES
7.
environmental impact and 01 Accenture, 2021: Harnessing the power of the semiconductor value chain
a clear plan about how to
reduce it
02 McKinsey, April 1, 2022: The semiconductor decade: A trillion-dollar industry
03 Semiconductor Industry Association (SIA), Boston Consulting Group (BCG), April 2021:
Strengthening the Global Semiconductor Supply Chain in an Uncertain Era
04 Deloitte 2022 semiconductor industry outlook
05 SEMI press release, Sept 27, 2022: Global fab equipment spending forecast to reach all-time high of nearly $100 billion in 2022
06 The Nielsen Total Audience Report, April, 2020
INVITATION TO ACTION 07 Gartner press release, June 30, 2022: Gartner Forecasts Worldwide PC Shipments to Decline 9.5% in 2022
08 Semiconductor Industry Association (SIA) press release, Feb 14, 2022: Global Semiconductor Sales,
We look forward to collaborating with our customers and partners from
Units Shipped Reach All-Time Highs in 2021 as Industry Ramps Up Production Amid Shortage
across the semiconductor value chain as they strive to build a new
09 Reuters article, December 7, 2017, TSMC sasy lastest chip plant will cost around $20 bln
generation of robust, resilient, flexible, and truly sustainable supply chains.
10 Gartner press release, Jan 11, 2021: Gartner Says Worldwide PC Shipments Grew 10.7% in Fourth Quarter of 2020 and 4.8% for the Year
If your organization is embarking on that journey, please reach out to us.
11 Semiconductor Industry Association (SIA): 2021 State of the U.S. Semiconductor Industry
You don’t need to strive alone.
12 ASML Annual Report 2021
13 ASML, Feb 23, 2022: Busting ASML myths
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