A Plan for Strengthening Resilience in the Semiconductor Industry

The semiconductor industry is navigating a landscape of unprecedented challenges, where the word "uncertainty" has become a constant refrain.

During the past five years, semiconductor companies have faced a series of shocks, from a global pandemic to persistent inflation and fractured supply chains. Each of these events tested the industry’s resilience, and it’s clear that disruption is now a permanent feature of the business environment.

All of this is happening while the semiconductor industry continues to grow at a head-spinning pace, thanks in large part to the adoption of artificial intelligence (AI) and electrification. As business continues to speed ahead, it’s more critical than ever to double down on resiliency. 

Resilience isn’t just about reacting to crises; it’s about proactively building a business that can adapt and thrive in any conditions. And when it comes to the semiconductor industry, we should focus on cementing our operational, commercial, technology, people, and enterprise resilience.

Operational Resilience: Buffering, Diversification, and Reshoring

To be candid, we will continue to see hiccups in the supply chain, and that’s why operational resilience is so important.

Operational resilience for the semiconductor industry needs to be addressed across three levels:

• Strategic buffering requires a focus on inventory analytics and dynamic rerouting. Strategic stockpiles can be a competitive advantage as disruptions will inevitably continue in the coming years.
• Diversifying the supply chain means moving away from the traditional model of sometimes relying on a single supplier or region. Events like the pandemic highlighted the fragility of global supply chains and the reliance on a few key regions for semiconductor production. As a result, we’re seeing a shift toward dual sourcing and regionalized operations. Initiatives like the CHIPS Act in the U.S., Europe, and similar efforts in Japan, India, and South Korea are driving investments in domestic manufacturing, R&D, and talent development. Moving to dual or regional sourcing ensures that you can continue production and supply even when one region is affected by a crisis.
• Reshoring and establishing a regional industrial footprint requires the greatest time and investment commitment: It can take up to four years and between $15B to $20B to bring a next-gen semiconductor fab online.

We’re already seeing high-profile examples of companies expanding their regional footprint. Take TSMC, for instance. The company announced a major expansion of its facility in Arizona, in addition to existing fabs in Taiwan. Meanwhile, TSMC is also investing in Dresden, Germany and Kumamoto, Japan. This diversification reduces risk while also creating opportunities for innovation and growth.

By having a more distributed footprint, companies can reduce their exposure to regional disruptions and ensure a steady supply of materials and components. However, it’s not just about building more fabs. It’s also about having the right people in the right places and ensuring they have the skills to keep the business running smoothly.

Commercial Resilience: Managing Pricing Dynamics

Commercial resilience is all about managing pricing dynamics and commercial strategies. When input costs rise, you need to be able to pass on those costs without losing customers. This requires a deep understanding of your market and the ability to make quick, informed decisions.

AI can be a game changer here. It helps you analyze market trends, customer behavior, and competitor actions to make better pricing decisions. Even a small change in price can have big consequences. AI also helps you zero in on the perfect price for each combination of customer, product, and channel by considering thousands of variables and learning from each outcome.

Technology Resilience: Embracing Innovation and Agility

Building technological resilience requires anticipating potential disruptions and being prepared to respond effectively. AI can play a crucial role in this by enabling scalable solutions that drive rapid impact and boost productivity.

While many companies recognize the benefits of AI, they often struggle with the associated costs. When deployed correctly, though, AI can be a significant value driver, not just an expense. For instance, agentic AI is able to streamline operations by automating tasks, optimizing processes, and enhancing efficiency throughout the design, manufacturing, and supply chain lifecycle.

One of the most exciting trends we’re seeing is the shift from mostly front-end innovation to include back-end and system-level design. Chiplet architecture, for instance, allows for the integration of different functional blocks, each built using distinct process technologies, into a single package. This not only increases design flexibility and improves yield, but it also helps alleviate supply constraints associated with advanced nodes.

We’re currently seeing disruptions in the supply chain impacting everything from rare-earth elements to specialty gases. The industry is responding by investing in material science to discover substitutes that are more abundant, locally available, or less geopolitically sensitive. Researchers are exploring alternatives to gallium and high-purity neon, and engineering teams are rethinking product designs to allow for more flexibility in component specifications.

In addition to investing in substitutes and alternatives, it’s also important to consider recycling certain elements and materials to support sustainability needs and goals.

People Resilience: Investing in Talent and Skills

People resilience is perhaps the most crucial aspect of building a resilient business. The semiconductor industry is facing a talent shortage, especially as supply chains are reshored. When disruption hits, it’s essential to have the right resources and skills in place to keep the business going. This means investing in your workforce and using technology to upskill and develop talent.

Moves like this require a significant investment in local talent and training programs. AI can help by providing personalized learning paths and automating tasks, allowing employees to focus on higher-value work.

Enterprise Resilience: Spotting and Mitigating Risks

Resilience is the result of a proactive mindset. This means having a clear and comprehensive business plan that can identify and handle potential problems before they arise. Supply chain diversity is an obvious example — if you depend on a single supplier for critical materials, you’ll need to have a “plan B” in place.

To help mitigate risks, it’s important to establish a portfolio of balanced measures across time horizons. Some measures, e.g., buffering, can be addressed in the short term. Others will play out over a much longer time period, such as building new fabs and sourcing new materials.

The Future of Semiconductor Supply Chains

Looking ahead, the global semiconductor supply chain is likely to become more geographically diversified and more complex. For decades, the model was optimized for efficiency, with specialized regions handling distinct parts of the value chain. Now, the focus is shifting toward resilience, redundancy, and regional self-sufficiency.

This reconfiguration will result in more balanced and robust supply chains, with critical capabilities being reshored or nearshored. Companies will need to focus on the core pillars of resilience: operations, commercial, technology, people, and enterprise business planning. By doing so, they’ll be in a strong position to navigate through current disruptions and whatever comes next.

In the end, the secret to success in the semiconductor industry isn’t just about having the latest technology or the most efficient supply chain. It’s about how you use these tools to build a business that can adapt and grow in any environment. By focusing on resilience, semiconductor companies can turn uncertainty into opportunity and continue to push forward.