Intel CEO Calls Semiconductors the New Oil, and Manufacturers Will Need Inventory Management Strategies
In a recent interview with CNN, Intel CEO Pat Gelsinger blunty stated a disturbing reality that highlights the largest single threat to the global supply chain in the coming years: chip availability. And this means that inventory management strategies will be more important than ever.
“[O]il reserves [have] defined geopolitics for the last five decades,” said Gelsinger in an interview with Julia Chatterley of CNN while he was visiting the World Economic Forum. “Where the technology supply chains are, and where semiconductors are built, is more important for the next five decades.”
The vast majority of the world’s infrastructure today is founded on the wide availability of electronic components and semiconductors that are housed in virtually every piece of equipment, from everyday products such as phones and laptops, to automobiles, to aerospace equipment, to life-saving medical devices. Many of these industries, over time, have consolidated to the point where many of the low-cost, widely available components in their builds are shared across disparate products across multiple industries. As a result, companies in separate industries are forced to compete in the same marketplace. If global chip availability remains stagnant or decreases, the implications are drastic. Lead times increase across the entire industrial landscape, costs increase, product output decreases, and, in extreme situations, geopolitical tensions can rise.
Today, the worst-case scenarios of this situation are now being seen to an extent with the tensions between Taiwan (responsible for the largest proportion of chips in the world), China, and the United States. At this stage, great — if to this point insufficient — pains have been taken to diversify the global supply chain away from China and, to an extent, Taiwan borders in order to minimize the impact of a wide-scale conflict such as war between the two nations.
Intel has been no exception to this. Last year, it announced that it would invest $20 billion to build two new US chipmaking facilities, as well as up to $90 billion in new European factories. “If we’ve learned one thing from the Covid crisis and this multi-year journey that we’ve been on it’s we need resilience in our supply chains,” Gelsinger said, adding that Intel’s manufacturing investments are aimed at “leveling that playing field so that good investment decisions can be made.”
Experts, however, remained concerned that such investments would not be enough should conflict escalate in the coming years. On a business-to-business level, production strategies must prioritize resiliency and risk management. While these strategies will look different based on the needs of the company, most who have a degree of manufacturing involved in their business model will have to incorporate sound inventory management strategies that keep limited, critical inventory on hand when needed. Partstat’s Inventory Ownership Solution is one such strategy, which give companies with limited capital and warehousing infrastructure the capability to maintain inventory levels for months or even years at a time.
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