Summary.
The auto and other industries have been brought to their knees by the scarcity of a tiny, and normally ubiquitous, piece of technology: the semiconductor. Plans for millions of cars have been cancelled and the damage will continue for years to come. How can business leaders prevent this from ever happening again? They need to transform their business by putting suppliers at the center. Currently, CEOs typically spend a tiny fraction of their time with suppliers. Instead, they need to follow the procurement-centric model of Apple and other Big Tech companies by reengineering and rebalancing the way they collaborate with direct and indirect suppliers, specifically: initiating one-on-one conversations with supplier CEOs; working with suppliers to develop mutually profitable joint business opportunities; making commitments about loyalty during future semiconductor and other crises – in general taking procurement to a more strategic level. Tesla is an example of a company that has done this phenomenally well. One or two tactics won’t work; to ensure resilience and success, what’s needed is a systemic approach that puts procurement at the core.
As we head into 2022, the semiconductor industry finds itself in one of the most defining moments of its history. While we are clearly still dealing with the global ripple effects of the chip shortage, there are also several other key trends dramatically shifting the landscape of this industry. In this blog, we’ll take a look at these trends and discuss what we can expect over the coming year.
The global semiconductor chip shortage has disrupted most industries and constrained supply chains. Automotive and consumer tech manufacturers have felt the biggest strain of reduced chip availability as many have been forced to delay product launches resulting in expected revenue loss.
As demand for chips continues to soar, supply chains could remain constrained for the foreseeable future. That means everyone – semiconductor businesses and their customers – should focus on building more resilient supply chains and use just-in-time models selectively.
Being better prepared for the future depends on re-examining near and long- term strategies and acting on lessons learned from shortages that disrupted manufacturing worldwide.
Today’s mergers and acquisitions are generally involving smaller deals or are taking longer to finalize due to geopolitical considerations. In particular, the environment has not been very conducive toward larger, cross-border deals. Still, select megadeal opportunities have emerged even as the effects of COVID-19 continue to exacerbate global chip shortages. We expect these larger deals would face similar geopolitical constraints, making smaller transactions an attractive alternative. Moving forward, it will be important for companies to learn how to extract more value out of smaller opportunities.
Geopolitical considerations are also impacting the semiconductor industry because some companies are building or planning to build their own fabs to secure chip production capacity. Governments around the world are setting policies and programs to help solidify or establish their position in the global semiconductor supply chain. As a result, we should expect the global semiconductor ecosystem has to evolve as the flow of chips and accompanying hardware and software shift.