As resilient as some parts of the tech economy are, leaders keep learning the hard way that the world has some pretty big bottlenecks as well — potential chokepoints in global supply chains that are hard to plan around, and very expensive to fix. The pandemic exposed one big Achilles’ heel for the global tech industry: its shockingly fragile supply chain for semiconductors. Covid lockdowns shrank chip production, which relies on a few companies in Asia; their depleted inventories could not keep up when stuck-at-home consumers suddenly spiked demand for digital technology. That left people around the world struggling to buy all sorts of electronic devices, from gaming consoles to smartphones to cars. Washington reacted with the CHIPS and Science Act, a landmark piece of industrial policy that allocates tens of billions of dollars to prevent future disruptions in a crucial part of the tech trade, and reduce the U.S.’s dangerous overdependence on Asian manufacturing. The vast and intertwined nature of modern tech supply chains makes it incredibly challenging to pinpoint the specific technologies or components that may trigger the next major shortfall. But it’s also hugely important in shaping the direction of tech policy. So what are the future microchip-style bottlenecks? What do we need to worry about? DFD put this question to a range of industry and supply chain specialists, asking them to predict the vulnerabilities that might eventually hold up the tech industry and consumers — and how they’re being addressed, if at all, today. Rare earth minerals: John Miller, the Information Technology Industry Council’s senior vice president of policy, told DFD that “one place to look if trying to predict future shortages might be to rare earth elements that are integral to components and products.” Critical elements are often disproportionately sourced from a single country or region, which creates the potential for sudden global disruptions. As its chip war with the U.S. heated up, China restricted international exports on gallium and germanium, two metals for which it dominates the world’s production (accounting for over 90 percent and 60 percent, respectively). Germanium-containing solar panels are used in spacecraft. Gallium arsenide is an alternative semiconductor to silicon, and its ability to operate at higher temperatures has driven progress in cars, precision-guided weapons and satellites since the 1990s. When scarce resources morph into geopolitical battlegrounds, that forces tech companies to defer to governmental authority and pray for timely intervention. Nickel, lithium and other elements are also on the Biden administration’s radar as it carries out an executive order on supply chain resilience. Specialized labor: Li Chen, a manufacturing management professor at Cornell University, said that in assessing what parts of a supply chain may go down, it’s the people that are often overlooked. “Talent and expertise, all this knowhow, is difficult to develop over time,” he said. With advanced microchips, for example, “If we say we want to have more fabrication capacity, you need people to run these fabs as efficiently as possible.” By 2030 — the deadline for companies funded under the CHIPS Act to start production — one industry group has projected shortfalls of roughly 67,000 semiconductor workers in the U.S. Semiconductor companies are adopting 10-day crash courses and apprenticeship programs to staff their plants with technicians (these are the jobs that Biden champions for not requiring a college degree). Another challenge is hiring engineers and computer scientists with advanced STEM degrees. They’re the ones charged with innovating the next generation of semiconductors, and the industry warns that gap won’t close without immigration reform. Chen argues that the most important missing piece could actually be supervisors, who are often promoted to oversee the team and its output after first working as technicians: “It takes time for people to work on the production line, learn all these things and then get promoted.” PCBs: If you thought microchips were the unglamorous little objects that threatened to crash the tech party, wait until you hear about printed circuit boards. These are the small, thin, often green-colored panels that appear inside devices and provide the circuitry to connect microchips with other electronic components. In the last 30 years, American PCB production declined from some 30 percent to just 4 percent of the global supply, with that work now concentrated in China and other Asian countries. At the same time, the number of companies making circuit boards in the U.S. plummeted from 2,200 to 147, mirroring the concentration seen in the microchip sector, according to the Printed Circuit Board Association of America. Two trade groups, the PCBAA and IPC, have been making the case that printed circuit boards are a meaningful hole in the CHIPS Act, which does not contain any support for reshoring them domestically. “The worst-case scenario would be a stockpile of semiconductors in the United States that couldn’t be put to work,” Shawn DuBravac, chief economist at the IPC, told DFD. “That requires PCB production and the ability to package them in increasingly sophisticated ways.” The PCBAA backs a House bill resembling a mini-CHIPS Act for the PCB industry. The proposal has been slow-moving, but the group expects to have a Senate companion later this year. More broadly, it’s an argument for making sure the full suite of hardware — from silicon wafer to the device you hold in your hand — has a reliable and diversified source. Infrastructure: Miller warned that “the next shortfall could theoretically come from anywhere, and could have nothing to do with supply, but rather issues such as transportation and logistics.” He cited examples of a ship blocking the Suez Canal or a labor strike at a vital port. Other recent examples include the Francis Scott Key Bridge collapse in Baltimore and Houthi attacks on ships in the Red Sea, though neither has snowballed into a larger shortage crisis. Jonathan Colehower, UST’s supply chain lead, similarly said aging infrastructure in the U.S. is a major threat, along with geopolitical tensions in the Middle East and Asia. There are risks we might not be factoring in, as well. He added that “many of the loading cranes that operate in ports around the world are manufactured, installed and maintained by foreign, state-owned companies” — meaning their governments could hypothetically collect data on U.S. cargo movements or introduce openings for remote attackers to later exploit. Increasingly, Congress and federal agencies are looking to future-proof U.S. infrastructure against cybersecurity risks.
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