The Critical Need for Semiconductor Supply Chain Resilience in the Public Sector
Semiconductors are the backbone of our modern world, powering everything from hospital imaging systems to traffic lights. However, the global supply of these advanced chips is under unprecedented threat. With Taiwan producing a staggering 90% of the world’s advanced semiconductors, the situation represents a dangerous single point of failure for global critical infrastructure. Geopolitical tensions, potential conflicts, and the nuances of the semiconductor production process can lead to sudden and catastrophic disruptions for essential public services.
Besides potential supply chain disruptions, the public sector stands to face significant challenges due to component scarcity. Unlike private enterprises, public institutions operate under rigid budgets and procurement rules designed for efficiency rather than crisis management. Therefore, it is vital for public procurement teams to proactively develop strategies for resilience in the face of semiconductor scarcity. This article outlines six critical actions that can prepare these teams for potential shortages.
1. Map Hidden Dependencies Across Supply Chain Tiers
Most procurement teams often lack visibility into where semiconductors reside within their supply chains. Chips are typically embedded several layers deep in intricate, interdependent systems. Conducting an extensive dependency mapping exercise to understand semiconductor reliance across all supplier tiers—beyond just direct contractors—is crucial. Identifying which critical services depend on specific components, their origins, and their manufacturers will allow teams to create a comprehensive register of semiconductor requirements. This enhances visibility and transforms abstract risks into a concrete understanding of vulnerabilities.
2. Assess Criticality and Build a Prioritization Framework
Pivotal decisions about resource allocation should not be made in haste. Instead, they require deliberate planning grounded in clear frameworks. Public institutions can benefit from constructing a prioritization framework that categorizes services based on criticality. For example, systems vital for life safety and emergency response should be distinguished from those that can tolerate temporary degradation. This systematic categorization will provide clarity during emergencies, ensuring that resources are allocated effectively.
Mark Roberts
3. Establish Early Warning Systems and Supply Chain Intelligence
Shortages in semiconductors do not emerge overnight. Various indicators such as geopolitical tensions, production disruptions, and export controls can signal an impending shortage. Implementing early warning systems that monitor these broad supply chain indicators is essential. This includes tracking industrial conditions, production capacity at key manufacturers, and trade restrictions. Integrating these alerts into a dashboard for procurement teams can facilitate timely decision-making and shift procurement from a reactive to a proactive function.
4. Validate Alternative Suppliers and Components
Waiting for a crisis to identify alternative suppliers is not a viable strategy. Complex regulatory, technical, and timing challenges can arise, making it difficult to switch vendors or components under pressure. To avoid this, public institutions should proactively validate alternative suppliers and components for all critical systems. This involves considering technical compatibility, certification requirements, and resource needs. While dual-sourcing may incur additional costs, it offers an essential layer of resilience during shortages.
5. Determine Strategic Stockpiling Levels for Critical Components
While stockpiling can be costly and risky, it can prove vital for components that support mission-critical services. Procurement teams should carefully gauge appropriate stockpiling levels, weighing factors like storage capabilities, obsolescence risks, and lead times. Prioritizing components with long lead times, limited sources, or historical supply volatility must be central to this evaluation.
6. Assign Senior Accountability and Integrate with Emergency Planning
Resilience in the semiconductor supply chain should not remain a technical concern confined to procurement departments. It’s imperative to assign senior officials to oversee semiconductor supply chain resilience initiatives. This individual should have the authority to allocate resources and foster cross-departmental collaboration. Their responsibilities will involve creating formal resilience plans that document dependencies, prioritization frameworks, sourcing strategies, stockpiling protocols, and emergency response procedures. These plans should be reviewed and updated regularly to reflect current systems and geopolitical dynamics.
Mark Roberts is a Global Public Sector Lead at JAGGAER.
