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Supply chain changes history By Bruce Kim – CEO of SurplusGLOBAL, Inc.
- News
- 2022-05-25
Supply chain changes history.
By Bruce Kim – CEO of SurplusGLOBAL, Inc.
President Biden's visit to South Korea before Japan this week, meeting the heads of South Korean conglomerates and a plan to visit Samsung's semiconductor fab is closely related to the restructuring of the US-centric supply chain. The meeting between President Biden and the heads of the four major corporate groups is not merely to encourage economic cooperation between the two countries and investment in the United States, but to go one step further and to strengthen cooperation in the economic security such as strengthening the supply chain of semiconductors and batteries. it is said to show Samsung's foundry (semiconductor OEM) plant to be built in the US, Hyundai's electric vehicle production base, and SK and LG's electric vehicle battery plant, etc., are the key supply chains for the United States as well as the important achievements in creating jobs on the large scale. This demonstrates that South Korea's position in the global supply chain have increased.
These days, the executives of semiconductor companies around the world are deeply concerned about the supply chains. Purchasing managers at semiconductor companies are concerned about when and where supply chain problems will arise. To make a semiconductor the size of a fingernail, tens of thousands of people from hundreds of countries and tens of thousands of companies around the world collaborate collectively, and tens of thousands of raw materials and equipment are used. Even if one or two of these raw materials, equipment, and parts are not supplied, the semiconductor fab may stop operating. The supply chain of memory semiconductors is not stable if only a few thousand of Samsung Electronics' partner companies are running well. Hundreds of thousands and millions of companies around the world that supply to thousands of Samsung Electronics partner companies should not have problems with manpower, logistics, and raw materials. As the corona outbreak and the shortage of semiconductors for automobiles caused a situation in which automobile factories around the world stopped production. At first, it was considered as a temporary problem, but now it is predicted that it will take two or three years to solve the automotive semiconductor supply problem. When the war in Ukraine broke out, the supply and demand of rare gases such as neon, krypton, and xenon was urgent, and prices skyrocketed several and dozens of times. Even this is still difficult to buy with money. Its price has jumped more than tenfold. When 3M's refrigerant plant in Belgium was closed due to environmental regulations, semiconductor fabs around the world took an emergency. When the 200 square meter sized Berlin plant, which produced ASML's small parts called wafer clamps, caught fire, large semiconductor companies such as Samsung Electronics, TSMC, Intel, and Micron were on the risk of a disruption in the introduction of advanced processes. ASML, which assembles 400,000 parts and makes 50 EUV scanners a year, must have suffered extreme difficulties in supply chain management. I wonder how urgent the ASML representative would have felt when he said that he was looking for urgent parts by tearing down the washing machine.
SurplusGLOBAL, a company that deals in used semiconductor equipment, is also in the midst of a supply chain crisis. As the delivery period for new equipment has increased several times to one or two years, customers are constantly looking for used equipment that can be put into production right away. Some used equipment has increased more than ten times of the original price, so it's a pity to tell customers the price. Customers from all over the world are pouring in orders for parts for various semiconductor equipment such as FPGAs, PLCs, pumps, chillers, motors, and generators.
If one weak link in the complex semiconductor supply chain is broken, the $600 billion semiconductor market will take an impact, and this blow will spread like dominoes to all industries, including electronics, automobiles, machinery, shipbuilding, and chemicals. There are many automobile factories around the world that cannot operate due to a shortage of semiconductors for vehicles, and it has become common for used car prices to be higher than new car prices.
As the trade war between the U.S. and China intensified in 2018, the corona virus struck, and the Ukraine war broke out. In 2021 alone, many experts predicted that the global supply chain problem would be improved in one year, but when it comes to 2022, the supply chain problem has become more serious. If the lockdown in Shanghai due to the corona virus is prolonged, the global economy will be shocked and staggered beyond comparison with the war in Ukraine.
If we look back on the history of mankind, the history of mankind has also changed whenever the supply chain changes due to the development of new technologies, climate change, natural disasters, and war. Homo sapiens overtook its predecessors, Neanderthals, and Homo erectus, to become the dominant human race because it developed supply chains by sharing food with non-kins and conducting long-distance trade. Evolutionary anthropologists believe that Homo sapiens' "transport and exchange instincts" began in eastern and western Africa 100,000 years ago. From tens of thousands of years ago, obsidian from Mt. Baekdu, Armenia, Melos Island in the Mediterranean Sea, and Chaiten Volcano in Chile was sold hundreds of kilometers and thousands of kilometers away and was usefully used as survival tools such as swords, arrowheads, and axes in the Neolithic Age. Throughout the history of mankind, the global division of labor has been made using collective intelligence, and the supply chain has become more complex. No, “When the supply chain changes, the history of mankind changes”.
Jang Bogo, who ruled the seas of East Asia in the late Silla era in the 8th century, achieved wealth and power enough to be worshiped as a god by conquering the East Asian seas at the time when the land Silk Road and the Maritime Silk Road were connected. It is said that a culture that was popular in Samarkand, Uzbekistan became popular in Gyeongju of Silla several months later. The Mongol Empire, established in the early 13th century, swept over the Eurasian continent, creating an unprecedented wide-area network in human history, providing a platform for people and cultures from all over the world to exchange and fuse. Although it does not come up well in the history textbooks we learned, Genghis Khan and the Mongol Empire were the pioneers of globalization that opened the era of global integration before the Renaissance and the Age of Discovery. The gunpowder developed by Chinese alchemists combined Muslim flamethrowers during the Mongol Empire and applied European bell casting technology to create a revolutionary weapon, the cannon, and European hegemony began.
Since the 15th century, the European age of voyages with overwhelmingly powerful guns and cannons has opened, the world has become more open, and a large amount of goods are traded globally, and the global supply chain has continued to run through every corner of the world like a thread. Korea and China failed to catch on to the flow of the industrial revolution led by Europe and became colonies in the 20th century. However, after liberation from the ravages of war, Korea has reached the threshold of an advanced country by exquisitely riding the flow of neoliberalism and the bipolar system of the Cold War era. However, in an era when the global supply chain is declining due to the US-China trade war and Corona, the future of Korea is once again becoming unstable. The neoliberal system that has led the global economy for the past 30 years has been collapsing since the financial crisis. The tide of nationalism and the new Cold War is coming.
At the beginning of the Ukrainian War, an American consultant argued that there were not many direct supply chain links between the United States and Ukraine and Russia, so it would have little effect on the United States. However, as the war continues, concerns are growing that “the war in Ukraine will lead to a global economic recession.” In the era of the 4th industrial revolution, the world's supply chain has become highly complex. Even if one weak link in the supply chain is broken, a chain reaction can occur, which can have a global impact.
Although the world is becoming a blockade and national self-interest is being strengthened, paradoxically, in order to solve the global supply chain crisis, the world needs to be more closely connected. This is because it is difficult to predict which link will be broken in which situation in the complex global supply chain. Although the US is trying to exclude China from its global supply chain, the US has no choice but to rely on China's production capacity with the few exceptions of some high-tech industries such as semiconductors. In fact, the world had no choice but to depend on China's production capacity was observed by the whole world during the mask crisis two years ago. The hyper-connected supply chain of neoliberalism led by the United States has tightly connected the world. It is difficult to predict when and where supply chain problems will arise, and it is difficult to predict how long this supply chain crisis will last. Resolving the supply chain crisis brought on by Corona can only be solved by close cooperation and connection around the world.
Now, the United States is trying to reorganize its global supply chain in high-tech industries such as semiconductors, centering on the United States. It is expected how President Biden of the United States and President Yoon Seok-ryeol of South Korea will solve the complex equation of the global supply chain.
The related WSJ article https://www.wsj.com/articles/why-the-chip-shortage-is-so-hard-to-overcome-11618844905?mod=hp_lead_pos5
Other related articles
https://semiengineering.com/long-lead-times-seen-for-equipment/
https://www.cnbc.com/video/2021/03/09/south-koreas-surplusglobal-resells-used-chipmaking-gear-to-foundries.html https://www.nikkei.com/article/DGXZQOUC18ENV0Y2A310C2000000/?unlock=1&fbclid=IwAR1X9Bcheavf5G-De46T7eO9n0WfgQ776kHkzrG5eU5KHycSfQjJ816IHiQ https://www.3dincites.com/2022/02/sustainability-101-the-role-of-secondary-markets-in-greening-the-semiconductor-industry/?fbclid=IwAR3D2sbkzYhcF1wI-ZxjX7WbFTMDYugWSLir-8X7uPxz7wB03C-vUp6Y09w
