Lloyd’s and WTW have launched a joint a report on the dangers dealing with the semiconductor provide chain, revealing a large number of challenges that threaten the $600 billion trade.
Semiconductors are a crucial part of the $2.2 trillion electronics trade and are utilized in numerous applied sciences akin to medical gadgets, autos, cell phones, and even clear power options. The trade is advanced and world in nature, with manufacturing vegetation predominantly positioned in East Asia. Because of this, it’s topic to quite a few dangers, together with geopolitical tensions, earthquakes, and excessive climate occasions.
The report, titled “Loose connections: Rethinking semiconductor supply chains,” particularly highlights the macro challenges dealing with the trade, in addition to its danger maturity and the rising curiosity in getting forward of provide chain dangers.
According to the report, the semiconductor trade is most involved with the medium-term danger panorama, with 81% of survey respondents in WTW’s Global Supply Chain Survey figuring out an absence of insurance coverage options as one of many best challenges within the medium time period.
The report additionally highlighted eight key provide chain danger drivers, together with financial pressures, provide and demand adjustments, expertise and labour, uncooked supplies and elements, know-how, packaging and transport, regulatory/geopolitical/political dangers and local weather change and sustainability.
The semiconductor trade moreover recognised important monetary exposures of their provide chains, which conventional danger switch can not presently meet. As such, they favoured danger switch at key moments of their chain.
Adopting a customer-centric view of danger may push the trade to behave for instance of “a resilient, digitalized supply chain in a connected world,” the report concluded, significantly with using knowledge and tailor-made insurance coverage options to complement retained danger.
“The semiconductor industry is acting now to respond to global demand and spark technological innovation,” stated Rebekah Clement, director of sustainability at Lloyd’s. “While the sector is mature in its approach to risk management, there are always unforeseen events that can impact production. The insurance industry has a critical role in partnering with semiconductor businesses to help them build resilience to manage the supply of mission critical products and to keep our digitally connected world turning.”
“At the moment, insurances cover only small parts of the supply-chain risks,” added Hugo Wegbrans, world head of broking at WTW. “The solutions provided by our industry provide only a wafer-thin patchwork of protection. Semiconductor businesses need to explore different ways to manage the significant financial exposures to achieve true resilience. Traditional risk transfer will only be one component of achieving that.”
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