Semiconductor shortage one of the biggest supply chain risks in Asia

Semiconductor shortage one of the biggest supply chain risks in Asia – QBE | Insurance Business Asia

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Semiconductor shortage one of the biggest supply chain risks in Asia – QBE

Demand for tech increased due to the ‘stay-at-home economy’

Insurance News

By
Kenneth Araullo

The latest supply chain resilience report from QBE Asia highlighted some of the biggest risks impacting the region, as well as outlining ways to use digitalization to businesses’ advantage and analysing the supply network for risks.

The report found that the biggest supply chain risk of 2023 is still the continuation of the global semiconductor shortage, a problem that sprouted after supply couldn’t meet with demand during the pandemic. According to QBE, there was an increased demand for tech appliances due to the “stay-at-home economy,” while at the same time manufacturing across the region and globally were hit by COVID. 2021 saw lead times on supply chips extended to over 22 weeks, one of the worst felt globally.

Although there is a slowdown in the demand for both smartphones and personal computers, there is a rising trend that will be impacted by further shortages in 2023. As a response to the growing ESG movement across the world, many have begun to shy away from fossil fuel-powered vehicles and into electric vehicles; this market will likely be affected by the continued shortage, as electric carmakers use silicon carbide chips.

Other risks to factor

QBE also outlined further risks which could impact the supply chain across Asia, including:

Political – these factors include political stability, tax policies, and regulatory approaches, as well as geopolitical factors in the context of jurisdictions
Social – these factors include core behavioural and demographic nuances for both the suppliers and the companies’ home markets; in addition, an aging workforce and the increases in education levels can both have their negative and positive impacts, respectively
Environmental – climate change is the biggest one under this category, in addition to efforts that are being made for broader sustainability in the growing need for a “just transition”
Economic – these factors include inflation, interest rates, exchange rates, in addition to employment and disposable income levels of potential customers
Technological – includes the impact of evolving technologies that can lead to new risks, such as cyber exposures
Legal – this addresses the legal frameworks for the supplier’s country and the one that the business operates in, including employment regulations, competition and antitrust laws, product regulations and intellectual property and patent laws

QBE also highlighted Apple as a case of a company being exposed to supply chain risk. The smartphone giant’s supplier, Foxconn, has been hit by strict COVID restrictions over the last few years, and Apple’s reliance on a supplier largely based in one country led to a loss of US$1 trillion in value in 2022. Apple has already made steps to make sure that it is not exposed to such risks again, with the tech giant outsourcing MacBooks to Vietnam and iPhones to India.

“Digitalisation is an important accelerator in supply chain operation”

While digitalisation remains important across supply chain activities, it has also introduced a new set of risks that need to be understood and managed. It’s this aspect that still necessitates robustness in security protocols, according to QBE Asia head of marine Rama Chandran.

“Digitalisation is an important accelerator in supply chain operation, but it doesn’t change physical delivery,” Chandran said. Firms can order supplies and track them electronically, but in most cases these goods still need to be physically delivered. Digital tools help in managing and understanding supply chains, but don’t eliminate the fundamental risk drivers.

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