Localizing the global semiconductor value chain

2024 LOCALIZINGTHEGLOBAL SEMICONDUCTORVALUECHAIN Strategizingforgrowth whilebuildingresiliencein therapidlyevolvingindustry CONTENT EXECUTIVESUMMARY3 1.EMPOWERINGICT:THECRUCIALROLE OFSEMICONDUCTORS4 2.DECODINGTODAY’SSEMICONDUCTOR VALUECHAIN6 3.TURBULENCEINSEMICONDUCTOR INDUSTRY:RECENTEVENTS10 4.ECONOMICCOUNTERMEASURESFORSEMICONDUCTORSUPPLY CHAINSHOCKS14 5.SCALINGUPTHESEMICONDUCTOR TECHNOLOGYINDUSTRYVALUECHAIN18 CONCLUSION20 SHINICHIAKAYAMA Partner,Telecommunications,InformationTechnology,Media&Electronics(TIME)Practice,Japan DANIELCHOW Principal,InnovationPractice,SoutheastAsia SUBRATGUPTA Manager,TIMEPractice,SoutheastAsia WewouldliketoacknowledgeallthosewhocontributedinthereviewofthisReport,especially:Dr.KlausSchmitz,YumaIto,AbhishekSrivastava,andJavierSoong. 2 EXECUTIVESUMMARY Semiconductorsarethebedrockofmoderninformationandcommunicationstechnologies(ICT).Withinahighlyglobalizedyetspecializedsemiconductorvaluechain,seismicshifts areunderwayamidsupplychainchallengesstemmingfromgeopoliticalissuesanddemand-supplyimbalances.Globalinterdependenciescharacterizethesupplychain,highlightingvulnerabilitiestoenvironmental,geopolitical,economic,andtechnologicalrisks.Consequently,governmentsmustproactivelyanticipateandadeptlynavigateglobalintricaciesastheyarchitectrobustandefficientlocalsemiconductorindustriesintertwinedwiththeglobalvaluechainandyetsufficientlylocalizedtoensurebothlocaleconomicbenefitandresilienceagainstpotentialfuturechipshortages. Recentglobalevents,includingnaturaldisasters,geopoliticalconflicts,andtradedisputes,havestressedthesemiconductorindustry,leadingtosupplyshortagesandeconomicimpacts.Environmentalriskslikedroughtsandpandemicsdisruptsupplychains,whileeconomicriskssuchasdemandsurgesstrainproductioncapacities.Technologicalrisks,includingcyberattacks,compromiseoperationalefficiencyanddatasecurity.Tradedisputes,particularlybetweentheUSandChina,furtherdisruptsupplychainsandmarketstability. Toaddressthesechallenges,governmentsareimplementingvariouscountermeasurestobolstersemiconductorsupplychains.Localizationeffortsaimtoenhanceindustryresilienceandreducerelianceonforeignsuppliers.InitiativesliketheUSCreatingHelpfulIncentivestoProduceSemiconductors(CHIPS)ActandtheEuropeanChipsActincentivizedomesticsemiconductormanufacturingand innovation.Countriesinregionsaroundtheglobeareinvestingheavilyinsemiconductordevelopmenttosecuresupplychainsanddriveeconomicgrowth. Scalingupthesemiconductorindustryrequiresfosteringengineeringtalent,promotingend-applicationindustries,andnavigatinggeopoliticalcomplexities.Governmentsmustreviewfiscalmeasures,attractskilledtalent,andsupportindustriesthatrelyonsemiconductortechnology.Collaborationbetweencountriesandstrategicinvestmentsinemergingandfrontiersemiconductortechnologiesareessentialforsustainingindustrygrowth. 1.EMPOWERINGICT:THECRUCIALROLEOFSEMICONDUCTORS Thesemiconductorindustryisofstrategicimportancetoacountry’seconomicdevelopment,technologydevelopment,andsecurity.Besidesbeingcriticalbuilding blocksforsecurityanddefenseapplications,semiconductorsarealsoessentialenablersforseveralindustrialapplications,numerous physicalapplicationsorproducts,andsoftware-enabledtechnologiesliketheInternetofThings(IoT)andAI.Theseapplicationsspanindustries,products,andfunctions. Industry -Automotive.Semiconductorsareessentialinautomotivetechnologyandpower electronics,drivingcrucialsystemslikeenginemanagement,safetyfeatures,andinfotainment,enhancingbothperformanceandsafetyinmodernvehicles. -Aviation.Semiconductorspoweressentialaviationfunctions,includingflightcontrols, navigation,andcommunications,ensuringsafetyandefficiencyinmodernaircraft. -Energy.Semiconductorsarethebasisforrenewableenergies,suchassolarpowerand windturbineenergysystems.Theyareusedforessentialprocesseslikepowerconversionaswellastransmissionofpowertothegrid. Products -Sensors.Semiconductorsareusedtocreatesensorsthatcandetectlight,heat,motion, andotherphysicalphenomena. -Modernmedicaldevices.Medicaldevicescombinelifesciencesandsemiconductors forwellnessandhealthcare.Thesecanincludewearablesensorsforhealthmonitoring,medicalrobotics,advancedimagingtechnologiesforhigh-resolutionultrasound,neuralinterfacetechnologies,andimplantabledevicesfortraumaintervention. SEMICONDUCTORCHIPSAREPIVOTALFORHIGH-TECHMANUFACTURINGANDARECRUCIALFOR ENABLINGAI Thesetechnologiesmayrelyonadvancedsemiconductorstoassistwithdatacollectionandprocessingforactionablefeedbackortohelpnavigatewithinthebodyforappropriatetreatment. Functions -Computing.Thesemiconductorindustryproducesmicroprocessorsandmemory chips,whicharetheprimarycomponentsincomputers,servers,anddatacenters.Thesedevicesareusedinvariousindustries,fromfinanceandhealthcaretomanufacturingandlogistics. -Communications.Semiconductorsareusedtoproducecellphones,satellitesystems, andothercommunicationsdevices.Theyarealsousedtocreaterouters,switches,andothernetworkingequipmentthatenablecommunicationsbetweendevices. -IoT.SemiconductorchipsareusedinIoTdevicestorunbothbusinessandpersonal errands.Asre