Electronics firms are thinking about supply chain risk management after a disaster-plagued 2011. Will they continue to do so?
Renesas Electronics Corp.'s trials and tribulations in the aftermath of the Japan quake have been well documented. In the immediate aftermath of the disaster, about half of Renesas' manufacturing capacity was off line. Renesas' Naka fab, one of its largest, remained offline for several months.
During last week's panel, Ali Sebt, president and CEO of Renesas' North American subsidiary, recounted the impact of the quake and some of the lessons Renesas took away from it, including reinforcing its fabs to withstand earthquakes of greater magnitude, establishing foundries as second source suppliers for most of its parts and greater emphasis on inventory management through conversations with customers about "where it makes sense to have inventory in the supply chain."
Sebt said the biggest eye opener for Renesas—and for many of its customers—was that the firm had literally hundreds of customers who had long ago outsourced so much of their manufacturing that they were completely in the dark when the earthquake hit and many production facilities went down.
"When the disaster occurred, they had no idea where parts were in the channel," Sebt said. "They had completely divorced themselves from that. And it was a very rude awakening for them."
Sebt said he is hopeful that one long-lasting impact of the disasters of 2011 will be that companies will have better knowledge of where parts are in the channel, even if they continue to outsource manufacturing to contract manufacturers and the like.
Ford said IHS found that one of the biggest issues in Japan in the aftermath of the quake was a complete lack of communication between customers and suppliers. A lot of customers, he said, had trouble finding out what was happening or when production would resume.
But as bad as the disasters in Japan and Thailand hit the global electronics supply chain, a Taiwanese earthquake of similar magnitude to that which struck Japan would likely have been much worse. Taiwan is home to the vast majority of the world's chip foundry manufacturing capacity.
Panelists generally agreed that the electronics industry's concentration of manufacturing in Asia creates significant risks, though responses about what can be done about it were generally mixed.
"If there are no second source capabilities in other regions, you have to deal with that risk," Braitberg said.
Ford said the strong regional concentration of capabilities in certain regions—such as the concentration of hard disk drive manufacturing and components suppliers in Thailand—poses inherent dangers. "I think at this point, people really have to understand the concentration of their supply chain," Ford said.