A global shortage of semiconductor materials and the breakdown of semiconductor supply chains since the Covid-19 pandemic has caused major problems across industrial sectors. New research published in Sustainability in 2023 proposes a blockchain system that could fix the broken supply of semiconductors.
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What is blockchain technology?
Blockchain technology is a decentralized and secure system that allows for the secure transfer of digital assets between users without the need for intermediaries such as banks or financial institutions. It is essentially a distributed digital ledger that records transactions in a verifiable and tamper-proof manner.
At its core, blockchain technology consists of a network of nodes that collectively maintain and validate the ledger. Each block of data on the chain is encrypted and contains a unique code or hash that is linked to the previous block, creating a chronological chain of blocks that is immutable.
Because of its decentralized nature, the blockchain is highly secure and resistant to tampering or hacking. This makes it a valuable tool for a wide range of applications beyond just financial transactions, such as voting systems, supply chain management, and even identity verification.
One of the most well-known applications of blockchain technology is the cryptocurrency Bitcoin, which uses blockchain to enable secure and transparent peer-to-peer transactions without the need for a central authority. However, blockchain technology has many other potential uses. These include applications in complicated supply chains, like those for semiconductors.
How did semiconductor supply chains break down?
Semiconductor materials have properties of both a conductor (a material that easily allows the flow of electricity) and an insulator (a material that does not allow electricity to flow). They have a unique ability to conduct electricity under certain conditions and act as an insulator under other conditions.
The most commonly used semiconductor materials are silicon and germanium, which are used in electronic devices such as transistors, diodes, and integrated circuits. These devices are the building blocks of modern electronics and are found in everything from smartphones and laptops to cars and medical devices.
Semiconductors are crucial to the manufacture of electronic devices because they allow for the precise control of electrical current, making it possible to create and manipulate signals in a variety of ways. This is why the failure of global semiconductor supply chains has been causing major problems across industries since 2020.
The Covid-19 pandemic caused a sharp decline in vehicle sales in spring 2020, leading vehicle manufacturers to cut their orders for all parts and materials, including the chips needed for various functions. When passenger vehicle demand rebounded toward the end of 2020, chip manufacturers were already committed to supplying their big customers with consumer electronics and IT.
This shortage of semiconductors has become a key field of international conflict due to geopolitical factors and trade policies, resulting in disruptions in the semiconductor supply chain. The shortage was exacerbated by events such as fires at Japanese factories and constraints in the global transportation system. Companies had to pay premiums for shipping, and airfreight faced higher demand due to global shipments of the Covid-19 vaccine.
In 2021, the US Department of Commerce launched a Request for Information on the semiconductor supply chain, targeting all stakeholders involved in the semiconductor supply chain. In September 2022, the US enacted the CHIPS and Science Act, investing more than USD 50 billion in manufacturing and research and development (R&D) for the semiconductor industry. The legislation also sets forth restrictive provisions to affect the optimized structure, security, and stability of the global industrial chain and supply chain of semiconductors.
Blockchain proposal to fix semiconductor supply
In a recent study published in the journal Sustainability, economists and mathematicians from the Chinese Academy of Sciences, Beijing, proposed a blockchain system that could solve the semiconductor supply chain problem.
The study integrated two blockchain methodologies – stochastic programming and robust optimization – to analyze the conversion of capacity across various semiconductor product types.
Stochastic programming is a mathematical optimization technique used to solve problems that involve uncertainty or randomness. It involves incorporating probability distributions into the optimization model, allowing decision-makers to account for the likelihood of different outcomes and make more informed decisions. This technique is particularly useful for complex decision-making problems in industries where future events are uncertain, and decision-makers must consider a wide range of possible outcomes. Stochastic programming can help improve decision-making by providing a more comprehensive assessment of risk.
Robust optimization is another mathematical optimization approach that seeks to find solutions that are robust or resilient to uncertainties and variations in input parameters. Robust optimization involves modeling the uncertainties and variations in input parameters as sets, and then identifying solutions that are feasible for all possible values within these sets. This approach can help decision-makers make better decisions in situations where input parameters are subject to variation or uncertainty and can help ensure that solutions are more reliable and effective over a range of different scenarios.
The resulting two-stage mathematical planning model aimed to maximize manufacturers' net profit. Leveraging the power of blockchain technology and information sharing between businesses, the research team enhanced the efficiency of their model, achieving theoretically optimal allocation of long-term capacity planning.
On paper, the resulting blockchain system could solve the problems set out by the research team. There are still significant real-world challenges to implementing such a system, however. The first is to gain buy-in and resource capacity from all relevant stakeholders to share information effectively – around the world. This is a large task with a great deal of uncertainty.
Secondly, blockchain technology has been criticized for its high energy and computing power costs. It is computationally difficult to run complex algorithms with large amounts of data, and critics argue that there is, as yet, no sustainable way to use blockchain.
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References and Further Reading
Li, R. (2023). Why the Semiconductor Supply Shortage Is Here to Stay. [Online] National Interest. Available at: https://nationalinterest.org/feature/why-semiconductor-supply-shortage-here-stay-206220 (Accessed on 13 March 2023).
Schinkus, C. (2020). The good, the bad and the ugly: An overview of the sustainability of blockchain technology. Energy Research & Social Science. doi.org/10.1016/j.erss.2020.101614.
Vakil, B., and T. Linton (2021). Why We’re in the Midst of a Global Semiconductor Shortage. [Online] Harvard Business Review. Available at: https://hbr.org/2021/02/why-were-in-the-midst-of-a-global-semiconductor-shortage (Accessed on 13 March 2023).
Yang, J., et al (2023). Blockchain-Based Long-Term Capacity Planning for Semiconductor Supply Chain Manufacturers. Sustainability. doi.org/10.3390/su15064748.
Shin, B., et al. (2020) Mitochondrial Oxidative Phosphorylation Regulates the Fate Decision between Pathogenic Th17 and Regulatory T Cells. Cell Reports. doi.org/10.1016/j.celrep.2020.01.022.
Pesheva, E. (2020). Tackling Coronavirus. [Online] Harvard Medical School. Available at: https://hms.harvard.edu/news/tackling-coronavirus (Accessed on 26 February 2020).
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