What should semiconductor buyers do amidst tension escalating between Russia and Ukraine?

According to Reuters, the escalating tension between Russia and Ukraine will worsen the situation of chips shortage. There is speculation that if Russia does invade Ukraine, as seems increasingly possible, the global shortage in semiconductors will likely be extended well into next year. That’s because it turns out that the two potential combatants are major exporters of two little-known but key raw materials in the creation of computer chips.

Ukraine is a leading exporter of highly purified neon gas, which is necessary for the lasers that are used to etch circuit designs into silicon wafers to create chips. Russia, meanwhile, is the world’s leading producer of palladium, which is essential for many memory and sensor chips.

In this situation, what can semiconductor buyers do to navigate the shortage?

GEP, A global supply chain and operations consulting powerhouse, has provided four solutions to semiconductor buyers.

In the short term, it is a supplier’s market. Buyers must exercise their decisions quickly since the chip buying windows are small. They would need:

1. Real-time market intelligence and primary research to find arbitrage:
They should leverage primary research with the help of a technology partner for daily market scanning to identify supply sources and fleeting “buying windows”.
Companies will need to be active in the market to identify these arbitrage opportunities before the chip supply dries up. Advanced market intelligence on capacity is crucial to identify new suppliers, bring them onboard and maintain supply.

2. Speed up the process to add new suppliers:
By working closely with their technology partner, companies can significantly enhance their speed to market for onboarding new chip suppliers. The goal should be to drastically reduce cycle time for adding suppliers, with the realization that if it cannot be done within a day, companies may end up losing precious supply.

3. Collaborate with finance teams for faster payments:
Procurement teams in enterprises should also rope in their finance departments to allow for faster payments to suppliers since these are itemized buys and buying off purchasing cards (P-Cards) may not be compliant. They should collaborate with finance teams to create a fast lane that allows for supplier payment setup within a day.

4. Find the optimal chip order quantity:
Companies looking to ensure stable chip supply should pre-align internally on economically feasible order quantities. Chip shortage is driving smaller order quantities (lower volume leverage) and rising shipping costs are adding to the woes.

With the solutions above, the manufacturers in all industries related to chips can manage a way to cope with this rough situation.

What should semiconductor buyers do amidst tension escalating between Russia and Ukraine?

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