22-07-2022 | | By Robin Mitchell
Recognising the challenges faced with large supply chains, Samsung has recently announced that it will be aiming to manufacture its own key consumables. What challenges do large supply chains present to semiconductor foundries, what has Samsung announced, and how will it help Samsung going forward?
Even though the semiconductor industry plays a vital role in the world economy (and society, for that matter), it was only after the COVID pandemic that the world opened its eyes to the reality that without semiconductors, life as we know it simply cannot exist. As soon as semiconductor manufacturers announced major shortages to supply due to widespread disruptions, the cost of electronic goods rose, the automotive industry ground to a halt and the development of new projects was seriously hindered. At the same time, the sale of refurbished electronics dramatically rose, and the value of second-hand increased due to the short supply of vehicles.
Now that COVID is mostly over (COVID is now the new common cold that we must learn to live with), industries are getting themselves back into full-scale production, and economies are showing good signs of recovery. But the semiconductor industry expects to see shortages for years due to the large backlog, and the war in Ukraine has worsened this challenge.
To make matters worse, semiconductor industries are also starting to see the issues faced with large supply chains that often plague semiconductors. Unlike basic products such as those made of plastic or glass, semiconductors are extremely complex devices and can be dependent on a thousand other industries. Mining companies are needed to extract the many raw materials needed to produce wafers, refining companies are required to extract extremely rare compounds, chemical companies are necessary for the many solutions needed for fabrication, and advanced technology companies are required to develop the machinery used to image wafers (something that itself is dependent on the semiconductor industry).
As such, semiconductor supply chains are incredibly complex, lengthy, and self-serving in some cases, which makes them highly vulnerable.
It would be impossible for a semiconductor foundry to be a Dennis Waterman and both write and sing its own theme tune (see Little Britain), whereby it is able to entirely source all materials and parts needed due to the extreme size of the supply chain, but it is possible for a foundry to identify key elements in its supply chain and focus on making those in-house solutions. Recognising the advantages of this, Samsung has recently announced that it will be moving to manufacture some of the expendable parts used in its manufacturing process to reduce its dependence on third-party suppliers.
The first step that Samsung has taken has been to partner up with other local South Korean companies for key supplies. Reducing the foreign aspect of the supply chain makes it possible to reduce the effects of government regulation, unexpected events, and economic downturns. It is also likely that local government incentives encourage the move toward local businesses, whether it is through tax credits or relaxed regulations.
The second step that Samsung is currently in the process of achieving is using these local businesses to develop expendable parts used in the manufacturing process of semiconductors. While most machinery used in the fabrication process is reusable, some parts of such equipment must be frequently replaced, including electrodes, focus rings, blades, and gaskets.
The ability of Samsung to create its own consumables undoubtedly removes the dependency on other manufacturers, but even with the use of local businesses to aid in their manufacture, these businesses will still be dependent on others for raw materials. As such, using local companies will not necessarily reduce the complexity of the supply chain but instead move complex manufacturing needs locally while still being dependent on foreign raw materials (such as silicon ingots, metals, and chemicals).
But when considering the nature of the disposable parts used to make semiconductors, their availability and price likely present a greater risk to Samsung if sourced from businesses that Samsung is not directly partnered with. For example, future lockdowns or disruption to global supplies will likely affect consumables greater than raw materials as it is easier for a small business that is entirely focused on a small niche of consumables to close down and fail than it is for raw materials to stop being available. Additionally, being able to manufacture the highly-engineered parts in-house also reduces the risk faced with delays and disruptions to manufacturing.