Insight

Issue 2: What can you do when the chips are down?

KPMG insight on: semiconductor shortages

David Roszmann

David Roszmann

Principal, Corporate Strategy, KPMG US

+1 858-956-9160

Scott Rankin

Scott Rankin

Principal and the US Strategy Service Line Leader, KPMG LLP

+1 617-988-1474

Scott Jones

Scott Jones

Principal, Advisory, Strategy, KPMG US

+1 408-367-7002

Irene Signorino

Irene Signorino

Director Advisory, Strategy, KPMG US

+1 213-955-8651

The semiconductor industry has previously experienced cycles of supply/demand imbalance, and this won’t be the last. To avoid supply problems in the future, C-suite executives of manufacturing companies will need to quickly adapt their operations to the reality of growing chip dependency.

KPMG C-Suite Perspectives - What can you do when the chips are down?

KPMG insight on: semiconductor shortages

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Issue two: What can you do when the chips are down?

KPMG insight on semiconductor shortages

The problem in a world increasingly reliant on all things digital, a sudden shortage of semiconductors, the silicon brains that run everything from cell phones to cars today is seriously impeding the global manufacturing industry's ability to deliver the goods. The travails of automakers may have filled the most headlines, but the chip scarcity is also affecting companies that make PCs, smartphones, video games and even steel & soap products. And there are few signs of immediate relief. In August, Toyota became the largest auto giant to slash production due to a worsening shortage. This supply chain emergency is a result of a perfect storm of natural and man-made events, including the COVID-19 pandemic. Chip fabrication plants are staggeringly expensive and can take up to two years to build. When the economy sputtered from lockdowns, many manufacturers cancelled chip orders, but the switch to remote working triggered a surge in demand from computer makers. So when the economic rebound began, chipmakers were already maxed out and couldn't ramp up their production capacity fast enough to oblige all buyers. Chip fabrication plants are staggeringly expensive and can take up to two years to build.

What you can do?

The semiconductor industry has previously experienced cycles of supply demand and balance, and this won't be the last. To avoid supply problems in the future, C-suite executives of manufacturing companies will need to quickly adapt their operations to the reality of growing chip dependency.

Your next steps:

  1. Ditch just-in-time thinking: Sourcing semiconductor components requires long-term planning that takes into consideration chip makers constraints.
  2. Collaborate more closely with chip makers: Form partnerships, share long-term road maps & forecasts and embrace direct sourcing.
  3. Invest in chip making capacity: Guarantee supply by reserving capacity from chip makers.
  4. Reduce reliance on custom parts: Use standard parts that can be modified, updated with software.
  5. Lift organizational barriers: Create a dedicated team to oversee and streamline semiconductors supply chains.

The KPMG strategy team has taken an in-depth look at the cause and effect of the ongoing chip shortages impacting the automotive industry. To find out the lessons for all industries relying on semiconductors, please download the KPMG report Surviving the silicon storm.


 

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