Text for items 29 to 40.

Smart factories (e.g., the industrial Internet of Things (IoT), automation and artificial intelligence (AI)) are radically changing manufacturing. The smart factory revolution is currently on hold, however, due to the shortage of one of its key components, semiconductor chips. Globalization, which has been an important driver of growth and the creation of wealth for decades, has also made our world far more complex. Have we reached a point where this interconnectivity is turning into a liability?

As is so often the case, the current semiconductor crisis is not a one-off problem that appeared out of the blue, it resulted from multiple overlapping crises that have characterized the early 2020s. They include the industry structure itself; limited capacity available to meet the global surge in demand for semiconductor chips, and rising protectionism and geopolitical instability. What is not likely to change anytime soon is the fundamental characteristic of the semiconductor industry itself. The production of semiconductor chips is not only extremely capital-intensive, it is also a very time-consuming process that consists of hundreds of individual steps.

Moreover, the semiconductor industry reflects the state of the global economy. Optimized to maintain the lowest possible level of inventory and maximum capacity utilization, it is hardly surprising—at least in hindsight—that global supply chains are in disarray. This may be easy to say now, but warning signs were already visible prior to 2019. Globalization started crumbling amidst the often abstract discussions on protectionism materializing in the real world, export stops and stockpiling. The impact of the semiconductor shortage on the automotive industry can only be described as dramatic. Around 11.3 million cars could not be produced in 2021 as a result of the semiconductor shortage, and a further 7 million cars are assumed to not have been produced in 2023. Forgone sales in this industry alone have run into the hundreds of billions. Given the fragility of global value chains and the expectation that the underlying conditions will not improve any time soon, questions about how this will all play out are growing.

In particular, smart factories critically depend on semiconductor chips. The Industrial Internet of Things (IIOT), which connects machines and devices and uses sensors and actuators to continuously monitor all stages of the production process, runs on semiconductor chips. Edge computing combined with 5G networks transmit data in real time, feeding into artificial intelligence (AI) control systems, also heavily dependent on semiconductor chips. With the huge volumes of data being generated, exchanged, analysed and used in real time, this demand for chips and programmable logic controllers (PLCs) is only bound to rise in the future. Especially as it is not only smart factories and the Industrial Internet of Things (IIOT) which depend on semiconductor chips, but also smartphones, personal computers and cars.

There are no quick or simple solutions. Highly complex production processes heavily rely on specialized machinery, which first need to be built; what may pose an even bigger problem is that key consumables in semiconductor production, such as neon, krypton, or argon, depend on key suppliers, in particular Ukraine and the Russian Federation. These key consumables are currently also experiencing severe shortages, and have exacerbated the semiconductor crisis even further.

Internet: < iap.unido.org > (adapted).

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