Memory and Storage

Global chip production must switch to regional-based manufacturing to survive, study says

23 June 2020
The COVID-19 virus has demonstrated that global manufacturing concerns must switch from large production sites in a single location, according to a new study. Source: University of Birmingham

As a result of the COVID-19 outbreak, supply chains have been interrupted at numerous factories, causing disruptions around the world. Because of this, global supply chains must redesign and reform in the wake of the COVID-19 pandemic, according to a new study from the University of Birmingham.

According to the study, the virus has demonstrated that global manufacturing concerns must switch from large production sites in a single location, to numerous smaller facilities around the world to reduce business risk.

The opinion that a more regional-based manufacturing strategy is needed moving forward is shared by others in the field as COVID-19 has revealed flaws in the current supply chain. Global production networks (GPNs) must balance the risk versus reward and economic value related to location and reliability, the study said.

As such, the industry may already be working toward this goal. For instance, Taiwan Semiconductor Manufacturing Corp (TSMC) said it planned to build a 5 nm state-of-the-art manufacturing semiconductor fab in the U.S. prior to the COVID-19 pandemic.

Additionally, Intel revealed recently it was also working with Semiconductor Industry Association (SIA) and the U.S. government to explore how to “ensure continued U.S. semiconductor leadership” as well as “strengthen domestic sources for state-of-the-art microelectronics and related technology.” This might include building a new facility in the U.S. or working jointly with other manufacturers for new fabs.

“There is a real tension between optimization of GPN and risks which ripple out across the globe,” said John Bryson, professor at the University of Birmingham. “COVID-19 is the first time that these ripples have impacted on every country and the majority of people living on this planet. It is unfortunate that companies, governments and geographers did not consider the outbreak of SARS in late 2002 as a testbed to develop new approaches to the management of risk. GPNs and offshoring, come with many risks that have been ignored.”

According to the University of Birmingham study, speed and economic impacts of COVID-19 have shifted the balance between state, citizens and businesses within national economies.

Researchers said that the most common operational response among American firms to the China-U.S. trade war was to relocate suppliers from China to another low-cost country. But the study said that firms need to develop strategies dealing with supply chain disruptions, leaning more on technology for smaller firms and focusing on efficiency and resilience.

“Globalization is not a novel concept, but COVID-19 has highlighted the risks associated with increasing interconnectedness of people and places through economic, political, cultural, and environmental changes,” Bryson said.

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