Top 5 Supply Chain Disruptions to Semiconductors 2023

So far in 2023, Resilinc’s supply chain disruption monitoring platform EventWatch^AI sent 7,422 disruption alerts for the high-tech industry—up just 1% from the same time period in 2022. Of these alerts, over 50% triggered a War Room—meaning these disruptions could disrupt the supply chain.

What were the causes behind these disruptions? And what challenges does the high-tech industry have to tackle to avoid future semiconductor shortages? In this blog, we dive into Resilinc’s exclusive supply chain data to uncover the top five disruptions to high-tech and semiconductors in 2023.

Is There Still a Chip Shortage?  

Since the car chip shortage that followed the pandemic, when semiconductors are mentioned, the question on everyone’s minds is, “Is there still a chip shortage?” According to J.P. Morgan, the chip shortages will continue through the end of 2023 into 2024. Overall, the supply of semiconductors and materials should improve in the automotive sector. However, this doesn’t mean the high-tech industry is in the clear. Other issues, such as PFAS regulations, China-Taiwan relations, and ESG regulations, are still hurdles to a more robust global semiconductor supply chain.

The top 5 disruptions through Q3 2023 are:

1. Factory Fires — 1250 Alerts — -19% decrease YoY
2. Mergers & Acquisitions — 831 Alerts — -20% decrease YoY
3. Labor Disruptions — 713 Alerts — 104% increase YoY
4. Business Sale — 705 Alerts — 4% increase YoY
5. Factory Disruptions — 389 Alerts — 28% increase YoY

#1 Factory Fires

Despite a 19% decrease year over year, factory fires have been the number one disruption to the high-tech industry this year, with 1250 alerts sent by EventWatch^AI. This is the first time in five years that there has been a decline in factory fires. This is primarily thanks to an increase in inspection procedures both during and post-pandemic. Typically, Factory fires are consistently the number one disruption reported globally, according to Resilinc data. Primary causes of factory fires include electrical and lighting equipment, faulty machinery, and flammable liquids and gases.

For high-tech and semiconductors in particular, the risk of a factory fire is high due to the highly flammable materials used in semiconductor manufacturing: combustible plastic materials, flammable and pyrophoric chemicals, and high-voltage electrical power. To make matters worse, semiconductors must be made in an ultra-clean environment. Smoke particulates from a fire can cause catastrophic damage to chips and equipment—significantly delaying production.

#2 Mergers and Acquisitions and #4 Business Sales

As countries and companies plan to nearshore and reshore semiconductor production, mergers, acquisitions, and business sales are rising—and so are related supply chain risks. While mergers and acquisitions can increase supply chain resiliency for the companies involved, they can also cause cyber security threats and create delays as suppliers shift. Learn more about how M&As can cause disruptions in our blog: How Do Mergers and Acquisitions Impact Supply Chains?

One of the most significant acquisitions in 2023 was Broadcom’s $69 Billion acquisition of VMware—the chipmaker’s third multibillion-dollar tech deal in the last four years. In August, the UK Competition and Markets Authority (CMA) approved the acquisition after a two-phase investigation began in March. Broadcom, one of the world’s largest semiconductor companies by revenue, can now accelerate its adoption of cloud technologies to fund research and development.

There have also been numerous business sales in 2023 so far. On September 19, Exalos AG, headquartered in Switzerland, announced its sale to California-based Indie Semiconductor. The sale, valued at $45 million, is set to strengthen Indie’s portfolio with breakthrough semiconductor technologies. On October 2, Entegris completed the sale of its electronic chemicals business to Fujifilm. This deal—valued at around $700 million—will likely help Fujifilm further expand its semiconductor and high-tech industries offerings. This is only a snapshot of the many business sales happening across the industry.

#3 Labor Disruptions

Through Q3, EventWatch^AI sent 713 alerts about labor disruptions in the high-tech industry. Shockingly, these numbers are up 104% year over year. Labor disruptions include company and site-level strikes, national strikes, layoffs, and labor protests, among others. Major layoffs in high-tech this year included job cuts at tech giants Google, PayPal, Meta, and Amazon.

This increase in labor disruptions was not only restricted to the high-tech space. Resilinc’s half-year data from 2023 revealed that labor disruptions were one of the biggest supply chain disruptions—up 136% across all industries tracked by Resilinc. This includes company and site-level strikes, national strikes (like the United Auto Worker strikes or the worker walkouts at Starbucks in the U.S.), layoffs, and labor protests, among others.

#5 Factory Disruptions

Factory Disruptions were the fifth-highest disruption to semiconductors and high-tech so far in 2023, seeing a 28% increase year over year. Factory Disruptions include shutdowns, production halts, warnings/citations, and labor accidents. For example, in August, Samsung Electronics announced plans to cease operations at certain older-generation facilities in Gyeonggi, South Korea. This is part of a larger dilemma across the industry—is it better to build new fabs or renovate aging fabs? Both are costly and time-consuming endeavors.

Labor shortages are also causing factory disruptions. In July, TSMC had to postpone the plant opening in Arizona until 2025 due to labor shortages. The need for more skilled workers is a challenge for reshoring or nearshoring semiconductors. Reports suggest the US semiconductor industry will encounter a shortage of 70,000 to 90,000 workers in the coming years. Another challenge is the cost of workers. TSMC reports the new US location will cost 30-50% more to run than one in Asia.

Will there be more chip shortages in 2024?

The semiconductor industry is undergoing a massive shift. Countries are trying to build their own fabs and shift production away from Taiwan while dealing with changing technology, labor shortages, factory fires, and cyber attacks. While supply chain disruptions will always occur, the semiconductor industry is in a particularly turbulent environment. Looking ahead to 2024, it will be crucial for semiconductor companies to start building strategies for long-term supply chain resilience.

To stay ahead of the competition, check out Resilinc’s latest Spotlight report on the High-Tech and Semiconductor Industry. Stabilization of the high-tech and semiconductor supply chain is evident. As the industry continues its road to recovery, focus will remain on greater resiliency, supply chain security, and materials sourcing transparency to prevent future supply chain shortages and process bottlenecks. In this Spotlight report we cover exclusive data, critical commodity export restrictions, exclusive expert insights from Genpact and SEMI, and best practices to build a resilient high-tech supply chain. Grab your copy here: 2023 Spotlight on High-Tech and Semiconductor Industry.