In brief

In brief

  • The global chip shortage has impacted nearly 200 downstream sectors ranging from gaming consoles, household appliances to textile manufacturers.
  • The semiconductor value chain requires collaboration across thousands of suppliers and thousands of global miles.
  • The report presents objectives that outline the complexity of the supply chain, vulnerabilities and suggestions to strengthen ecosystem resiliency.


Semiconductor manufacturing has become incredibly complex and the effort it takes to get electronics in front of the end customer at a reasonable price and time-frame has been very challenging. For decades, many industry challenges have gone undetected in our daily lives but this year, the public has become more aware of the semiconductor industry and the manufacturing disruption caused by the global chip shortage and massive supply chain delays.

From industries like automotive, mobile, industrial and nearly 200 additional downstream sectors, many companies have felt the pinch of securing enough chips to meet customer demand for products. For example, when one singular chip is at risk, production of the entire end product is subject to delay.

The breadth and depth of the value chain

The semiconductor value chain is expansive but Syed Alam and Patrick Moorhead break down the players, places and partners in the journey.

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No company can execute across the end-to-end semiconductor value chain. The development of the fabless/foundry model allowed companies to outsource intensive manufacturing. This model requires collaboration across thousands of suppliers around the world. For example, with IP and design from Silicon Valley, equipment from the US, Europe and Japan, specialty chemicals and gases from Europe and East Asia, manufacturing in East Asia and packaging, assembly and testing in Southeast Asia, this global dispersion complicates the development and manufacturing of a chip.

Illustrative flows within global semiconductor value chain.

The flow of the value chain in the visual above is a simplified display of the global players involved for a semiconductor.

The collective value of companies across the global ecosystem enable the design, build and delivery of semiconductors. From natural disasters to global pandemics, understanding how international partners all contribute to the development of a semiconductor explains why the value chain is constantly evolving and the need for resiliency in it.

This example lists the countries and the capabilities they contribute to the semiconductor value chain ecosystem:

  1. UK - Semiconductor IP houses license IP blocks to fabless firms
  2. US - Fabless firms design complex chips with the support of EDA software
  3. India - Design verification teams verify specifications and layout
  4. US - OEMs lock in chip design for end products
  5. Netherlands – Fab Capital Equipment make the process equipment used by fabs to manufacture chips
  6. Germany – Gases, specialty chemicals and fab consumable suppliers equip fabs with key fabrication and facility cleaning materials
  7. Japan – Materials companies form silicon ingots from pure silicon and slice into wafers
  8. Taiwan – Foundries etch 60+ layers of transistors and interconnected wires onto wafer to develop integrated circuit (IC)
  9. US – Test equipment firms design and manufacture equipment used by OSATs to test semiconductor chips
  10. Malaysia – OSATs assemble, package, and test semiconductor chips
  11. China – EMS players integrate ICs into OEM end product electronics
  12. Argentina – Consumer buys smartphone


Demand for semiconductor chips in different industries increases with the development and production of new or enhanced end-application products that incorporate electronic components ranging from traditional applications such as data processing machines, electronic controls for engines and machinery and consumer electronics products to new applications of in-home appliances, medical equipment, and automobiles.

Data Processing

Computers, laptops and peripheral equipment are the largest market segment for semiconductors. These ICs range from memory storage chips to LEDs found in PC screens. Demand for these products experienced a spike due to the COVID-19 pandemic as employees and students worldwide were forced to at-home work and study.

Communications

The second largest market for chips is for those used in cell phones, wireless infrastructure and modems. The growth of network equipment in developing economies, the migration from 4G to 5G and growth in the smartphone market has boosted production by 24.1%. 5G is expected to be a major demand driver since new capabilities are needed for 5G smartphones.

Automotive

With the continued focus on electric and autonomous vehicles, the auto market has the highest forecast growth of 12.4% by 2026. This is a prime example of an industry requiring increasingly sophisticated technology making it challenging for semiconductor companies to race to fulfill orders for new application-specific chips for the auto industry.

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Impact of chip shortage on automotive

Let’s take a closer look at the automotive industry and the impact of the chip shortage on automotive as an example of an industry that was heavily obstructed by the global chip shortage.

10.8%

Of 71.4M in lost automotive sales

$308B

At an ASP of $40K, it translates to this loss in automotive sales

7.7M

Cars sit idle in lots

A complication of the semiconductor value chain is the semiconductor trilemma.  This concept explains the trade-offs that push and pull against supply chain decision makers across the value chain.

The pyramid displays the cost, supply and technology innovation levers that push and pull across the value chain by supply and demand constraints.

The semiconductor supply chain trilemma is complicated by the fact that only two of three levers can co-exist at any point in time.

The COVID-19 induced chip shortage highlighted the weakest links of the semiconductor industry and it is crucial for companies to strengthen their resiliency of a broader and global collaboration among all ecosystem players for the value chain in the long-term.

About the Authors

Syed Alam

Managing Director – Strategy & Consulting, Semiconductor, Global Lead


Timothy Chu

Senior Manager – Accenture Strategy


Arjun Krishnan

Manager – Accenture Strategy


Jolie LeBlanc

Senior Manager – Accenture Strategy


Shaden Alsheik

Manager – Accenture Strategy


Cathy Chen

Senior Consultant, Strategy


Michael Kurniawan

Manager, Strategy


Kumar Nandanampati

Analyst, Strategy

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