The Evolving Nature of Supply Chain Resiliency

Economic security is national security, and semiconductor manufacturers are at the forefront when it comes to the modern economy. As industries continue to increase their reliance on chips, imbalances in the semiconductor supply chain are becoming evident. These chips are essential to the digitization and connectedness of our society, yet the supply chains that provide them are incredibly challenging and complex.

BCIU sat down with executives at Intel to discuss the state of supply chain resiliency, the company’s environmental priorities, and what lies ahead from a policy perspective.

A Unique Moment in Time

After experiencing shortages and choke points in the supply chain during the COVID-19 pandemic, governments realized that the creation of stronger, more resilient, and sustainable supply chains is more important than ever. “Just in time” is no longer enough.

Intel CEO Pat Gelsinger compares the current situation to the energy landscape. “Where oil reserves are located defined geopolitics for the past five decades; where the technology supply chains and semiconductors are located will define geopolitics for the next five,” he says.

Therefore, to ensure the world has access to the chips needed to meet demand today and, in the future, creating a more geographically balanced supply chain is critical. World leaders in the EU, Japan, and Mexico, for example, are heeding the call to action and enacting policies that incentivize the semiconductor industry to invest in more regional clusters within their borders.

What ‘Rebalancing’ Really Means

Rebalancing is about risk management, which is already a fundamental practice of supply chain management. All too often, we see a disruption occur in the center of production for a critical input that spreads across the industry.

This rebalancing effort aims to mitigate the risks associated with disruptions, such as natural disasters or geopolitical tensions, like the Thailand monsoons in 2011, or the Texas blizzard and Japan factory fire, both in 2021.

For chips, resiliency requires a geographically diversified supply chain. Currently, 80% of the world’s semiconductor manufacturing capacity is in Asia. Rebalancing the supply chain involves a multi-pronged strategy: creating a skilled workforce, ensuring adequate R&D for innovation, and increasing resilient manufacturing capacity to guarantee there are enough chips to meet the needs of the world’s users.

In an effort to shore up the U.S. supply chain, legislators passed the CHIPS and Science Act in 2022. It has spurred more than $200 billion in manufacturing capacity-building investments from the semiconductor industry. Other governments are also committed to developing a more diversified and resilient semiconductor manufacturing landscape, as evidenced by Japan and the EU’s Chips Acts. Governments in the Western Hemisphere, such as Mexico, have taken notice and are working with the U.S. to identify opportunities for collaboration and how they can further develop their workforce. They are also engaging with suppliers and ecosystem partners to develop incentive packages that facilitate investments in their markets.

Building with Sustainability in Mind

As more companies adopt zero-emission initiatives, one priority will shift to upgrading infrastructure powered by renewable energy and run by technologies that reduce energy and water use. Manufacturing chips traditionally involves complex, logistical challenges and massive needs for reliable electricity and water. The growth of regional manufacturing clusters provides an added benefit of a more sustainable supply chain.

“Anything that’s going to reduce energy costs and make the production of chips more efficient is going to be helpful,” says Sarah Kemp, Intel’s Vice President of International Government Affairs. “At Intel, we talk about our handprint and our footprint. Our footprint is what we do at Intel to reduce our energy use and carbon emissions Our handprint is how we help our clients have a greener supply chain.”

Intel has been an industry pioneer in sustainable practices, and its on-site alternatives and renewable electricity installations have grown exponentially. In April 2022, Intel committed to net-zero greenhouse gas emissions in its global operations by 2040. In 2022, Intel’s total renewable global energy reached 93%. They achieved 100% renewable electricity in the U.S., EU, Israel, and Malaysia in 2022, and are approaching that goal in Costa Rica. Other internal projects, such as cutting-edge water membranes and community collaborations, support Intel’s water goals. Additionally, Intel has net-positive water use in the U.S. and India, and they conserve 9.6 billion gallons of water and invest in watershed projects that have restored 3 billion gallons of water.

Looking Ahead

The semiconductor industry holds immense strategic importance and serves as a linchpin for the modern economy across various sectors. Today, the industry is poised for significant changes and advancements. Rebalancing the semiconductor supply chain, investing in diverse regional clusters, and fostering collaboration among stakeholders will ensure a stable and secure chip supply.

Sustainability is also gaining prominence as a key priority and driving the development of greener and more environmentally friendly chip manufacturing processes. The industry is focused on reducing energy consumption, implementing renewable energy sources, and conserving water resources. And these commitments are driving innovation. Intel is at the forefront of these efforts and is investing in renewable energy, reducing its carbon footprint, and making progress toward a more sustainable future.

Governments worldwide recognize the importance of supply chain resiliency, and they are taking decisive action to create geographically balanced capacity that meets demand and enhances sustainability. While Intel continues to work in partnership with governments, partners, and the larger ecosystem, its leadership champions that addressing these challenges relies on collaboration within the industry.

BCIU hosts a variety of programming on ICT, supply chain and related topics. To learn more, visit: www.bciu.org.