The Chip Shortage Breakdown: How Can A Connected Digital Infrastructure Help?

As the global semiconductor challenge extends into 2022, businesses continue to feel supply chain disruptions as they wait for chips to be available. As foundry companies specialize in production exclusively, their manufacturing capacity has limitations, and currently, they are not able to meet the demand from global and fabless companies. Furthermore, integrated device manufacturers (IDM) are decreasing their manufacturing capacity due to their dependency on foundry companies. On the other hand, a number of fabless companies, such as Apple, Google and NVIDIA, are expected to grow due to the diversification of semiconductors. The shortage that started in 2019 and worsened due to the pandemic has heavily disrupted industries like mobile, electronic and automotive, forcing companies to spend more time and money to control their supply chains.

From a technology point of view, semiconductor processing technology continues to evolve to support a demand for a higher spec processor. With IBM recently launching the world's first 2nm chip, more companies are expected to follow soon. As the latest semiconductor chip can have over ten billion transistors, it is anticipated to have a large amount of electronic design automation (EDA) data, including design and masking data.

So how can companies create a digital infrastructure to unlock efficiency, ease disruptions and future-proof their functions? Create a secure and direct connection to improve supply chain visibility.

The majority of the world's semiconductor foundry companies are located in the East Asia-Pacific region. In 2020, Taiwan controlled 63% of the market share, with South Korea at 18% and China at 6%. As these regions dominate the market, companies around the globe rely heavily on them for production. Additionally, many fabless companies are located in Silicon Valley in the United States, relying on multilocation R&D on a global scale. The physical geographical distance between foundry and fabless companies proved to become a vulnerable point in the industry as the pandemic created constraints on the global transportation system.

As supply chains slowly recover, it is clear that businesses need to start investing in a digital infrastructure that enables direct communication across borders and can help them interact and transact in real-time, with secure connection points to protect their designs. Promoting real-time information exchanges can help mitigate the bullwhip effect, a supply chain phenomenon in which demand forecasts yield supply chain inefficiencies-illustrated by the current semiconductor shortage.

Building a robust digital framework can also aid in synchronized planning. As the semiconductor network is complex with multiple players, digital models help facilitate capacity planning, demand and supply alignment across a mix of stakeholders while remaining adaptable to any varying requirements and external forces. In fact, according to Accenture's Globality and Complexity of the Semiconductor Ecosystem Report, each segment of the semiconductor value chain has, on average, 25 countries involved in the direct supply chain and 23 countries involved in supporting market function.

Build an IIoT platform to scale productivity and production
Companies deploying more agile digital infrastructures improve their production by bringing edge resources and services closer to partners. For example, digital infrastructure architected using an Interconnection Oriented Architecture (IOA) strategy eliminates the distance between IT services, users and fabrication plants, optimizing the data exchange among various entities across clouds and networks over secure private interconnections.

Due to great strides in technology, the semiconductor industry is extremely fast-paced. Therefore, companies must be able to keep up and stay efficient. One solution is for organizations to invest in creating a robust IIoT platform. The technology helps companies link the physical processes with their internal systems to visualize manufacturing operations fully. It helps companies become agile in their manufacturing and prototyping and supports efficient pre-production processes such as design and proof of concept. This enables them to frictionlessly adapt to innovations and releases by adjusting and learning from data in real-time, so they can make their supply chains more responsive, proactive and predictive.

Leverage seamless remote working operations
Remote work and government-mandated lockdowns also played a role in exacerbating the semiconductor shortage. Businesses were ill-equipped to deal with digital working and management. Communication, an essential key to any ecosystem, broke down and caused disruptions in the industry. In terms of production, many factories also saw a decrease in capacity. For example, Malaysia only allowed companies to operate with 60% of their workforce during June 2021.

From a technology point of view, semiconductor processing technology continues to evolve to support a demand for a higher spec processor.
Shinichi Murakami, Senior Manager, Segment Marketing, Equinix

Connected cloud architecture
As supply chains work to catch up on the existing demand pile-up, companies also need to look to the future. The market for smart devices is only becoming more competitive, requiring chip designs to be smaller and more complex. As EDA test and development environments tend to have high levels of concurrency, at a given moment in time, only so many jobs can access the same project folders and perform a vast amount of concurrent I/O operations. Storage becomes a performance bottleneck and impacts EDA job run times.

It becomes critical to mitigate the effects of storage-related slowdowns. Leveraging an interconnected infrastructure on Platform Equinix can help reduce these bottlenecks. Pure Storage's multicloud, easy-to-use storage solution on Equinix Metal provides low latency and unparalleled access to all the right places, partners and possibilities to achieve digital transformation. Pure Storage scales seamlessly up to several million IOPs and 75GB/s. This capability eliminates storage performance bottlenecks and unleashes engineers' full capabilities to design next-generation sub-10nm silicon chips.

The future is digital-first
The pandemic has highlighted the semiconductor industry, and many similar industries are rooted in traditional systems. Due to concerns over security and innovation capacity, the rate of technology adoption remained low pre-pandemic.

The urgency of the situation has forced many companies to accelerate the adoption of new technologies in their systems. Learn more about how Equinix empowers and protects companies, especially in the semiconductor industry, from adversity with digital-first interconnected solutions.