Semiconductor industry set for further tech disruption in 2024

Semiconductors are the lifeblood of the modern global economy, and are found in all types of electronics – Copyright AFP/File Yuichi YAMAZAKI

Driven by supply chain concerns and new regulations, more EU, Japanese and U.S. companies will look to reshoring and establishing their own fabs. This is according to Sumit Sanyal, CEO and co-founder of minds.ai, who outlines the impact of these regulations to Digital Journal.

In the industry, fab is short for “fabrication”, which means to produce, and refers to semiconductor production facilities in the semiconductor industry.

On this topic, Sanyal foresees some big changes: “The coming years will mark a significant turning point in the semiconductor industry with a notable upswing in product companies (such as smartphone and automotive vendors) acquiring their own fabs.”

This means a change to the business model. As to the cause, Sanyal thinks: “This shift is being driven by a few different factors: the evolving regulatory landscape, labour and talent shortages, and supply chain concerns.”

Hence the semiconductor world cannot be distanced from wider global events, as Sanyal  observes: “As geopolitical insecurities proliferate, more organizations will be looking to bring their manufacturing activities back to the U.S, EU and Japan.”

In terms of related factors, Sanyal finds: “This reshoring is supported by efforts in the U.S and EU to build momentum for semiconductor manufacturing domestically, recognizing its critical role in both national security and economic resilience.”

In terms of how this is altering businesses, Sanyal predicts: “At the same time, more companies will also be looking to take back more control over and diversify their supply chain – which means that companies that have traditionally relied on other foundries to produce their chips will consider having their own fabs, instead. In many cases companies are evolving a “second sourcing strategy” with in-house fabs covering base capacity and extra demand being pushed out to foundries in Asia,”

As to the advantages, Sanyal finds: “This eliminates much of the concern over having to depend on other companies to produce much-needed chips as demand continues to grow. Think about the disruptions the automotive industry faced last year due to chip shortages and it’s easy to understand why more companies will consider taking control of their own supply chains.”

Environmental factors also need to be considered. Here Sanyal sees: “Climate change driven disruptions are becoming more frequent and have started sounding alarms in board rooms in every global manufacturing company.”

These issues have a direct impact on the industry: “Chip manufacturing is especially susceptible because of the extremely concentrated nature of production facilities. The only way to deal with this is diversification across geographies and always having 2nd and 3rd sources available. It’s not going to be easy, but the path ahead is clear.” Sanyal summarises, noting: “In tandem, these two trends are set to redefine the global semiconductor landscape.”