The global semiconductor shortage, exacerbated by the Covid-19 pandemic, continues to cause widespread chaos for the manufacturing sector. Semiconductors underpin almost every electronic device on the planet and, with the UK amongst the world leaders in chip design, the shortage could have significant repercussions for manufacturing businesses.
According to a letter to Prime Minister Rishi Sunak in The Times, tech leaders have warned that without a strategy for the UK semiconductor operation, the country’s tech sector could be at risk. In the effort to combat the reliance on Asia for semiconductor supply and with reports of an escalating a US-China trade war, onshoring appears to be a way to provide medium-term self-reliance.
However, a recent report has suggested that the UK should move away from onshoring of semiconductor manufacturing, and instead focus efforts on its competitive advantage for chip design, using international alliances to strengthen supply chains.
The UK is home to 110 semiconductor design firms, several of which are world leading companies, making the UK the clear leader in Europe as well as a significant global player. To put this into perspective, the UK only has 23 fabrication plants, and they tend to produce an older style of chip, and generally for products made in the UK.
By taking advantage of the UK’s existing strengths in the semiconductor chain and working to develop a hub of trusted partners with a shared approach to fill the gaps in the rest of that chain, could see the UK in an extremely strong position. Investing in cutting edge semiconductor production requires large capital investment and extensive knowledge and as they become more advanced, companies will increasingly need to be linked into that trust ‘hub’ of material and equipment suppliers as well as continuing research and development. Funded by the European pandemic relief fund, Spain has committed $13bn towards investing in new semiconductor factories by 2027, and Samsung is investing a huge $356bn in the next five years to accelerate growth in semiconductors and other next-generation technologies.
While the future remains uncertain, manufacturers will naturally seek out reliable supply chains to avoid further disruption, and this is where onshoring could be beneficial for the wider manufacturing sector. Being able to draw on suppliers at home increases agility across the supply chain, as well as reducing product lead times during manufacture, and often increases the level of trust between the business and their customers.
Whilst onshoring has its advantages; reducing risk from supply disruptions, minimising transportation time and cost, and closer relations between manufacturer and supplier, it can be a complex and expensive process.
But, there is a way you can get ahead of onshoring and adapt to a shifting market. At Forterro, the businesses we work with that are finding success in the disrupted supply chains we see across Europe are those with the perfect balance of data analysis and training and development in order to remain competitive. As the sector develops its capabilities to understand and utilise data more quickly and efficiently, increased data flow between different processes and operations can support wider improvements in production planning. Using internal and external data sources to identify trends, helping to solve previously unsolvable problems and identify the unknown ones too, means that manufacturers can locate hidden congestion and operational inefficiencies.
Adding another layer of automation using artificial intelligence (AI) and machine learning (ML) to forecast demand and service quality can help to identify solutions to problems before they even appear. This ongoing digitalisation is vital for manufacturers to become more resilient, agile and responsive, and the intelligent use of data and automation will help to prepare the sector for any trend towards onshoring.
Into the future
Another issue underpinning the problems in the semiconductor sector globally is talent shortage. Intensified competition for engineers and technicians has already started, and is likely to continue if policymakers focus on a strategic approach to the semiconductor industry through onshoring. Deloitte predicts that by 2030, more than one million additional skilled workers will be needed to meet demand in the semiconductor industry, equal to over 100,000 people entering the sector annually. In the UK, there are fewer than 20,000 students studying Computer Science at A Level – demonstrating the clear gap within the UK workforce.
Whilst the UK can’t compete with the likes of the US and China which benefit from a much larger pool of resources and established supply chains, onshoring gives its manufacturing sector a welcome boost.
Looking ahead, whether at the UK’s semiconductor sector or manufacturing sector as a whole, there’s little doubt that more reliable supply chains with closer connections between manufacturers and their customers is going to be more than a growing trend. It’s a decision that can’t be made overnight and it can’t be made for every manufacturer; whilst anchoring may work for one, changing tact with design may be the better option for another.
What’s clear, however, is that it’s never been more important to know what’s happening across supply chains and data-driven processes and personalised ERP systems will be vital to help the UK’s manufacturing sector to navigate economic headwinds and keep the industry moving in the right direction.
By Benoit Wambergue, VP of cloud products strategy, Forterro