“Geographically Diversify Manufacturing” to Solve the Supply Chain Crisis: Analyst

The semiconductor supply chain crisis has been exacerbated by the United States’ complete dependence on other countries to build the chips and that must change, according to an analyst.

“There’s no question that we need to geographically diversify manufacturing,” said Daniel Newman, founding partner and senior analyst at Futurum Research. “We have depended absolutely too much on Asia without having a more predictable macroeconomic and geopolitical relationship … That could change depending on factors that have nothing to do with our trade relationship or the development of our products.”

American chipmakers today build well north of 90 percent of their semiconductors in Taiwan and almost everything else in Korea without any manufacturing capability closer to home, Newman told the Best of conference on Monday. Breed (BoB) 2021, hosted by CRN’s parent company, The Channel Company. . This leaves the supply chain vulnerable to Chinese disruptions given China’s strained relationship with Taiwan, he said.

[Related: Coronavirus Strains IT Supply Chain: ‘We’re Down To Buying Computers From Costco]

But the tide seems to be turning, Newman said, with Intel announcing plans to invest $ 20 billion here in the United States. relocation, according to Newman.

“Having more capacity to handle more manufacturing here means we can scale up in different situations where we have supply constraints as well as advance efforts and innovation here in the United States,” Newman said. “If the money that was spent on returns and redemptions had been spent on building infrastructure to evolve and produce, would we be in the same situation?

Newman urged elected officials to go to the other side of the aisle and put in place policies that allow a certain percentage of global manufacturing to return to the United States. if geopolitical or other circumstances reduce the availability of chips from abroad.

He also lamented the adoption of a “just-in-time” production strategy over the past decades, which has meant that virtually no one up or down the supply chain has transported oil. ‘surplus. Just-in-time has made manufacturing much more profitable, but also creates considerable risk, because if part of the chip is missing or unavailable, Newman said it becomes impossible to produce in volume or on a large scale.

“We have decades here of just-in-time delivery that has fundamentally hampered our ability to handle any sort of disruption in our supply chain, and when it comes to such a major disruption that affects so many parts, top to bottom of our labor supply we are unable to deliver, ”Newman said. “And that creates a problem which is only exacerbated because the solution of building capacity is not immediate.”

He believes that an inflection point has been reached and that everyone from Intel and GlobalFoundries to Samsung, TSM and Micron will increase their capacity and that American manufacturers will bring some capacity to the United States. If these companies can find the right talent and reach production scale, Newman estimates. The end of 2022 could be when the supply of semiconductors finally exceeds the demand for semiconductors.

“Our thirst for apps, social media, mobile devices, PCs and building next-generation businesses with the best technology to try to create the most enthusiasm for employees and make the future easier. remote and hybrid work, ”Newman said. “All of this will continue to drive investment in data centers from the public cloud, more apps, more data, more demand. We need to be able to respond to that. ”

The United States must bring more semiconductor manufacturing back to this country to ensure America is protected even if China and Taiwan start to fight, according to Dale Shulmistra, CEO of New York-based Invenio IT. York. America can focus on high-end chip manufacturing components, such as advanced wafer manufacturing, to ensure the work’s financial viability, Shulmistra said.

“We can’t just build software applications and appliances,” Shulmistra said. “I think we need to make building equipment a priority. “

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