Sectors recovering faster and more affected by chip shortages

The lack of computer chips has contributed to disruptions in global supply chains over the past two years. At this time, on the horizon of this sector appear some features of recovery, but with different tensions. We expect some sectors to mark a recovery by the end of this year and some others will be postponed until 2024 or later.

An analytical study conducted by Bain & Company ranked the sectors most affected and the fastest to achieve recovery.

cars

The study showed that the automotive and industrial sectors are among the sectors most affected by the lack of electronic chips, but will be faster to achieve recovery and it is expected that this will be reflected through the amount of output offered, that we. will testify at the end of 2022 and the beginning of 2023.

The study showed that the products of the automotive sector rely heavily on two categories of chips, namely 12-inch advanced chips and various 6-inch and 8-inch chips, while these categories will show significant improvements in production capacity within 9 -12 months. and the reason for this are new ready-made products made online

These types of chips make up more than 90% of the semiconductors used by car companies and industrial companies.

consumer electronics

The study predicted that the consumer electronics sector, which includes smartphones and tablets, would be witnessed over the next year and beyond, as these products depend on chips designed in 6-inch, 8-inch and 12-inch sizes, production volume of whom it will grow.

Affected sectors

On the other hand, the study concluded that the current shortage of semiconductors will lead to damage in many sectors by 2024, including game consoles and computer servers, as demand for these products increased significantly during the Covid-19 pandemic period. and market supply It falls under the “bleeding” chips, but the production of advanced substrates has stopped and as a result its market supply has decreased.

Suppliers of these products suffer from low financial resources to build factories dedicated to the production of their advanced substrates and act quickly to meet growing demand.

High-level chips based on these substrates make up almost 50% of the semiconductors used on servers and more than half of those used on game consoles.

Because chip shortages will continue for the foreseeable future, many companies have shifted from a reactive approach to a flexible and far-sighted strategy for semiconductor supply. Leading companies follow a two-pronged approach, the first of which depends on building bold investments to address short-term supply disruptions and the second on preparing the company and developing longer-term alternative plans that are more flexible. Here are some of the best practices in development.

On the other hand, the study examined a range of emerging solutions and best practices for companies and sectors affected by chip shortages, which were in two categories: short-term solutions and long-term solutions.

short-term solutions

The study noted that the development of a design plan to deliver products with the arrival of the loss phase in the sales sector as a result of supply chain disruptions, and major companies are working to quickly reproduce existing products, in order to find solutions for the lack of basic components in the sector. To address the issue of chip shortages, companies can remove non-essential features supported by unavailable chips, reduce product personalization, import chip parts from multiple suppliers, or produce new products based on available chips that serve unused market areas. The most successful companies use an experienced cross-functional team with the right skills to redesign quickly and effectively, giving them a clear set of goals and incentives to get the project done on time.

Drafting the request

The sales and marketing sector plays a vital role in responding to supply crises. It is considered as one of the effective methods in this field to direct the attention of the customers towards the widely available products, by increasing the prices of the products affected by the shortage, or by promoting more available products in the market. A technology company is developing a machine learning algorithm for its online store, so when a buyer shows interest in a low-end product, the website recommends another product that is more available and has better specifications. .

Long-term solutions

Flexible solution design

Leading companies are constantly improving their products with the aim of increasing flexibility and working proactively to develop products before supply disruptions occur. Through our work with clients and global landscape analysis, we have found that many specific attributes typically improve the likelihood of a resilience strategy succeeding. These include reducing the number of product parts, reusing components, adopting standard design approaches, making the product architecture as flexible as possible, and separating software from hardware. For example, in the case of a lack of chips, the fewer “hooks” the product has in silicone, the better.

Enhanced capabilities to create a deeper understanding of supply chains

The ability to follow supply chain agendas has increased in many companies, as following this principle supports sustainability goals and contributes effectively to increased efficiency and flexibility.

Traceability, enabled through digital tools, allows companies to track products as they move along the value chain, quickly gathering accurate information about the data source and supplier practices. This data enables companies to develop practical and systematic plans and think of proposed implementation scenarios, which contributes to improving operations interactively.

Companies are also facing potential shortages by setting up supply chain monitoring systems, gathering real-time market situation information and identifying areas of supply shortages for components where they rely heavily on their production processes. .

Investing in innovation for the value chain

During this period with more frequent and more visible supply disruptions, leading companies are realizing that traditional supply chain approaches will not solve this problem. One type of partnership that has been very popular is the company’s payment to its supplier to support its production capacity and to ensure the agreed volume of product to be marketed in the hands of buyers. Leading companies are updating their operating model, with the aim of optimizing the structure of cooperation between different sectors including engineering, sales, marketing and procurement, who are the most important teams to manage during supply disruptions and to be ready for the next paradigm.

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