Semiconductor Risks: Read the Fine Print

Few procurement professionals spend their days digging into the annual reports of their semiconductor suppliers—and if they do, most probably won’t get into the very back pages of the report. If they did, though, they would find a litany of potential risks that should be considered when creating a sourcing plan for these critical components.

In the modern world, we have to think more broadly about risk than ever before.  Recent months and years have taught us to expect the unexpected. Here’s an example from the annual report of one large semiconductor supplier: “These risk factors do not identify all risks that we face; our operations can also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations.”  In short, we don’t know what we don’t know.

These reports provide a laundry list of potential semiconductor risk: commodity price shifts, variable demand, technology cycles, business conditions (including downturns in specific market segments or regions), shifts in consumer spending, trade policies and other geopolitical conditions, an event that impinges on on a product introduction, pricing pressures, and the list goes on.

Every semiconductor company puts its own caveats on why they might not be able to deliver as they hope.  They owe it to their shareholders and boards of directors to share the potential problems that keep them up at night. In turn, it gives us plenty to think about. Especially in the electronics industry, it draws our awareness that certain technologies are limited to specific geographic area or company. A single unexpected  risk event, from an earthquake or pandemic to a regime change, could decimate critical intellectual property and put product availability at risk.

The semiconductor risk litany points to the importance of sourcing decisions. Choose partners that can think strategically bout how to mitigate the risks that your suppliers have identified, whether it’s IP lost or a downed production line. The right sourcing partnerships provide insulation against the unexpected.

To read the article on EPSNews.com, click here: https://epsnews.com/2022/06/06/semiconductor-risks-read-suppliers-fine-print-epsnews/