Global electronics industry is likely to face a threat from semiconductor supply chain, according to a new report by Lloyd’s and WTW.
The report, ‘Loose connections: Rethinking semiconductor supply chains’, said the risks to the $2.2tn industry also include geopolitical tensions, earthquakes and extreme weather.
This is the second report in the three report ‘Rethinking supply chains’ series worked on by Lloyd’s in collaboration with WTW. The semiconductor supply chains industry is estimated to have a market value of nearly $600bn and supports a $2.2tn electronics sector that, in turn, drives almost $90tn of global GDP.
Semiconductors are the chips that enable the electronics industry and are found in vehicles, mobile phones, medical technology and even power the clean energy solutions being used to enable a sustainable future, such as solar and wind farms. Due to the complex and global nature of the sector, it is subject to a multitude of risks including geopolitical tensions, earthquakes, and extreme weather, with manufacturing plants predominately located in East Asia.
The report revealed that the sector is most concerned by the medium-term risk landscape, which is where significant scope exists for increased collaboration between the industry and their insurers to address protection gaps.
Over 80% of respondents in the WTW’s Global Supply Chain Survey said a lack of insurance solutions was among the greatest challenges in the medium term, sending a clear signal to insurers that the industry requires partnership to transfer risk.
The survey found eight major supply chain risk drivers: economic pressures, supply and demand changes, talent and labour, raw materials and components, technology, packaging and transport, regulatory/geopolitical/political risks and climate change and sustainability.
By adopting a customer centric view of risk, the semiconductor industry could act as an example of a resilient, digitalised supply chain in a connected world – with data and tailored insurance solutions used to supplement businesses’ retained risk. M