June 16 2025
Improving Semiconductor Supply Chain Robustness Focusing on Uncertainty
The semiconductor supply chain is a complex network that involves multiple stages and participants, from raw material suppliers to end consumers. Raw Material Suppliers provide essential materials such as silicon wafers, chemicals, and gases required for semiconductor manufacturing and geopolitical context has proven many potential impacts. Equipment Manufacturers, which supply the sophisticated machinery and tools needed for semiconductor fabrication, such as lithography machines, etching equipment, and testing apparatus may also be subject to variations in demand for many reasons. As IDM (Integrated Device Manufacturers) and Foundries interact through transfer of production volumes, demand and prices variations have sometime severe impacts. This also stands for Assembly, Testing, and Packaging (ATP) where, after fabrication, chips are assembled into packages, tested for functionality and performance, and then packaged for delivery.
Finally, Distributors and Original Equipment Manufacturers (OEMs) who use the semiconductor components to build final products such as smartphones, computers, and automotive systems, have also great influence over the famous bullwhip effect. As they are primarily dependent of the behavior of End Consumers, i.e., the final users of the products that contain semiconductor components, they are also sensitive to social, economic, and geopolitical context.
The Bullwhip Effect is a phenomenon in supply chain management where small fluctuations in demand at the consumer level cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer, and raw material supplier levels. This effect can lead to inefficiencies such as excess inventory, stockouts, and increased costs.
The Bullwhip Effect may result from many causes such as inaccurate Demand Forecasting (leading to overproduction or underproduction), poor Inventory Management policies or Rationing and Gaming (when supply is limited, customers may order more than they need, anticipating that they will receive only a portion of their order).
Several mitigation strategies can be undertaken, but the most efficient one for Semiconductor Manufacturers is to improve Demand Forecasting, using diversified information sources and processing the data through advanced analytics and real-time data to make more accurate demand predictions. Collaboration and Information Sharing comes next, enabling better visibility over demand across the supply chain to ensure all parties have accurate and up-to-date data. As knowing demand in advance wouldn’t by itself be sufficient, working on setting reaction policies to demand fluctuations is also of outmost importance. As an example, a peak in demand will require additional capacity to maximize shipments, while on the opposite a collapse in demand should be anticipated through adapted equipment qualification, targeting energy and waste reduction.
That’s where identifying segments with the greatest amplitude and uncertainty over this amplitude play a key role in designing a robust, resilient, and smart semiconductor supply chain. Understanding the semiconductor supply chain and the bullwhip effect is crucial for managing supply chain efficiency and reducing costs. By implementing strategies to mitigate the bullwhip effect, SC4EU industrials will improve their responsiveness and adaptability to market changes.
