Lloyd’s, the world’s leading marketplace for commercial, corporate and specialty risk solutions has published a report on the risks to semiconductor supply chains – an industry estimated to have a market value of nearly $600bn and supporting a $2.2trn electronics sector that in turn drives almost $90trn 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: Loose connections: Rethinking semiconductor supply is the second in a series of three exploring supply chain risk, delivered in collaboration with WTW.
The report finds 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. Of survey respondents in WTW’s Global Supply Chain Survey, 81% 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.
Those interviewed also highlighted eight key supply chain risk drivers: economic pressures, supply and demand changes, talent and labor, raw materials and components, technology, packaging and transport, regulatory/geopolitical/political risks and climate change and sustainability.
These risk drivers matched those of the food and drink industry, which favoured end-to-end supply chain coverage. In contrast, the semiconductor industry recognised large financial exposures in their supply chains which traditional risk transfer cannot currently meet, and so favoured risk transfer at key moments in their chain.
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.
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