'Trepidation' over semiconductor supply chain issues

‘Trepidation’ over semiconductor supply chain issues

20 March 2023

A joint report from Lloyd’s and WTW has identified worsening supply chains and a lack of insurance options for semiconductors as worsening risks that could significantly impact the global electronics industry.

The report, which is one part of a broader outlook on supply chain concerns, identifies “geopolitical tensions, earthquakes, and extreme weather” as a multitude of factors implicating the nearly $US600 billion ($895.29 billion) industry.

Primarily developed in East Asia, semiconductors are chips utilised for the production of vehicles, mobile phones, solar and wind farms, and other vital technologies.

The report says the sector holds “considerable trepidation” over the protection gap, with 81% of respondents to a WTW global supply chain survey highlighting a lack of insurance solutions as among the key challenges being faced.

Other noted responses in the survey identify supply and demand changes, material costs, economic pressures, geopolitical risks and climate change as critical issues faced by the industry.

WTW Global Head of Broking Hugo Wegbrans says insurers currently only offer a “wafer-thin patchwork of protection” to the operations that uphold a $US2.2 trillion ($3.28 trillion) electronics industry.

“Like many other businesses, semiconductor companies are aware of their supply chain vulnerability and are actively working to increase their resilience,” he said. “For the gaps, they are looking to the insurance industry to partner.”

He says semiconductor businesses “need to explore different ways to manage the significant financial exposures to achieve true resilience.”

The report notes that the risks faced by the industry are similar to those faced by the food and drink industries, which primarily favour end-to-end supply chain coverage.

Click here to access the report.