This week in an interview with Business Broadcasting Network CNBC, Intel CEO Pat Gelsinger likened the capabilities of semiconductor chip design and production to the equivalent of oil and energy in the geopolitics in the coming decades.  His argument: “Oil reserves have defined geopolitics for the last five decades. Where the fabs are for a digital future is more important.”

While the Intel CEO’s comments are not the first to compare the two capabilities, the timing is especially poignant in the backdrop of the conflict occurring in Ukraine, and the heightened tensions between China and the island of Taiwan.  The former is the existing global epicenter of semiconductor design and production.

He further stated: “While the Russia-Ukraine situation isn’t central to any of the supply chains for semiconductors, it just reinforces the geopolitical instability and the urgency around building supply chains that are geographically balanced — U.S., Europe and Asia — and far more resilient for the digital future.

Gelsinger’s comments preluded his expected testimony before the U.S. Senate in support of proposed legislation to subsidize U.S. based semiconductor design and production in the amount of $52 billion.  He has additionally been speaking to EU leaders with similar comparisons.

From our Supply Chain Matters lens, truer words have never been stated in such a timely manner.

Two years of the effects of a global pandemic have uncovered how a global wide shortage of semiconductor can impact major industries and their business and financial performance such as that which occurred across the global automotive industry.

The Ukraine conflict provides added concerns related to reliable supplies of key metals such as cobalt that are required in lithium-ion battery production or in neon-gas required for production of semiconductors. The new urgency warnings related to accelerated global warming that is occurring across the earth provides added urgency in use of alternative energy, and semiconductor design and supply will play a crucial role.

Then again, having supply networks for key materials and components that are geographically balanced makes sense in other dimensions as well.

Businesses and government policy makers need to be attuned to the new geopolitics, and they center on resilient supply network capabilities.

Bob Ferrari

 

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