Dealing With Material Shortages Like Resin and Chips: Will Supply Chain Disruptions Ever Settle?
There’s no doubt about it, the global supply chain is a mess right now. As if pandemic-related slowdowns weren’t enough, a number of additional factors are influencing resin and chip shortages, including:
The diversion of semi-conductor supplies to meet consumer electronics demands during lockdowns and the shift to working from home;
A major fire at a semiconductor factory in Japan;
Growing geopolitical tensions; and
A sideways ship that created a days-long obstruction of the Suez Canal.
Add to that a Hurricane named Laura and a winter storm named Uri that left petrochemical factories in Louisiana and Texas scrambling to declare force majeures.
Regardless of which may be partly or mostly to blame, factors like these have contributed to a growing snowball of semiconductor and plastics shortages that are slowing manufacturing and in some instances grinding it to a halt.
Since both semiconductors and resins are used to make more products than one can imagine, this imbalanced supply-demand seesaw is having a ripple effect across multiple industries and leaving consumers waiting endlessly for their goods to arrive—just when they’re emerging from their cocoons eager to spend those stimulus checks.
Here, we’ll examine some of the immediate impacts of shortages like these and whether supply chain stabilization is a realistic expectation for those feeling the brunt of it all.
The Complexities of Chips
While power outages in some sectors are merely an inconvenience, when it comes to semiconductor fabrication plants—that’s not the case. Instead, this complex process involves hundreds of steps and precise nuances like the need for operating temperature control.
That’s why the weather troubles in Texas were such a big deal: a number important fabs are located there, including Samsung—one of the most advanced facilities of its type in the U.S. that also has the greatest capacity for production; NXP—a major supplier of auto industry chips; and Texas Instruments—a leading producer of analog chips used for sensing and other applications.
But bad weather is just one part of the shortage equation. A recent study from the Semiconductor Industry Association (SIA), described the greater issue that’s impacting the semiconductor supply chain: the concentration of suppliers in specific regions. Report findings indicate there are more than “50 points across the overall supply chain where a single region accounts for 65% or more of the total global supply.” According to the report, even if the numerous processes and components required for semiconductor production could be more evenly distributed around the globe, manufacturing capacity is largely housed within two regions: China and East Asia.
“About 75% of semiconductor manufacturing capacity, as well as many suppliers of key materials—such as silicon wafers, photoresist, and other specialty chemicals— are concentrated in China and East Asia, a region significantly exposed to high seismic activity and geopolitical tensions. Furthermore, all of the world’s most advanced semiconductor manufacturing capacity—in nodes below 10 nanometers—is currently located in South Korea (8%) and Taiwan (92%),” the report says.
Referring to the semiconductor supply chain as the “backbone of the digital economy,” the SIA notes that these small-but-mighty components are required for a multitude of applications across industries—including mobile phones; consumer electronics; personal computers; the information and communication technology (ICT) infrastructure; industry; and automotive.
That’s why regional disruptions of any type to this particular supply chain have such a critical and widespread impact. And if onshoring sounds like an easy fix—it’s not. The SIA warns that with all that’s involved in semiconductor production, a siloed approach like that wouldn’t be financially feasible and would cause chip prices to go through the roof.
However, one answer, the SIA says, is to create “minimum viable capacity” in areas that don’t house any part of the supply chain at all—such as the acute need for more manufacturing facilities in the U.S. The organization says doing so will require more government incentives to compete with regions that offer them now.
When Shortages Collide
Whether referred to as resins, plastics, or both—there’s a big shortage in this area, too. In this sector, COVID-19 has disrupted the supply chain on a number of fronts—including raw material shortages out of Asia; increased chemical prices; a limited supply of workers at major seaports; a reduction in refinery production due to decreased demand; and all that bad weather that hit the U.S. Gulf Coast.
These materials are needed for the production of a multitude of products—including various types of coatings, food packaging, appliances, smartphones, car parts…you name it. That’s why a shortage in this sector is another big deal, especially when you add the scarcity of semiconductors and a surge in port congestion linked to COVID-19 restrictions and various global factors.
To complicate matters further, products that need one item on the shortage list need others too. The semiconductors manufacturing process requires materials from the petroleum supply chain and the auto industry (among others) needs both plastics and chips.
Stabilizing the Global Supply Chain
As we noted in a recent article about the impact of the new $571 billion infrastructure plan, stabilizing the global supply chain will require finding ways to address the gaps created by all of these complex dynamics.
Additionally, as David Sitton, CEO of CLN Worldwide notes, a semblance of stabilization may slowly occur as the vaccines kick in: "We expect that supply chain disruptions will begin to moderate as vaccination rates increase. However, the imbalance in supply and demand will remain a challenge through the end of the year."
CEO, CLN Worldwide
Leslie Robinson, Operations Supervisor at CLN Worldwide agrees and says the company is using creativity to address the daily challenges they face: "The country is starting to open up, but the workforce is not yet established. While we’re definitely feeling this imbalance, we're working on creative solutions daily to keep it all moving."
Operations Supervisor, CLN Worldwide
At CLN, those creative solutions include maintaining a foundation of supply chain best practices while adapting to individual customer needs.
If you’d like to learn more about how CLN Worldwide can help you adapt to the current landscape of supply chain disruptions and how we're currently leveraging our Proprietary Logistics Management Platform to streamline other Fortune 50 companies, contact us today for a free demo.