Semiconductor industry drives strong demand for project logistics

Semiconductor sourcing, manufacturing diversification, and the adoption of modularization is driving a strong demand for project logistics.

A growing trend among semiconductor/microchip firms to diversify production and sourcing and adopt modularization is driving strong demand for project logistics, a major provider tells AJOT.

DHL Industrial Projects, a unit of DHL Global Forwarding that manages complex project logistics, deep sea chartering activity and heavy-lift cargo, quotes forecasts that put the semiconductor industry’s value at more than US$1.38 trillion by 2029, almost double when compared to 2022.

This spectacular growth not only reflects the ongoing digitalization of various sectors, the emergence of Artificial Intelligence (AI) and Internet of Things (IoT), but also a diversification within the industry, it adds.

Semiconductor producers are increasingly focused on enhancing the resilience of their value and supply chains, adapting to meet evolving market demands and often looking at omni-shoring opportunities to protect and better serve their client bases.

Challenges to Semiconductor Logistics

DHL Industrial Projects’ newly-appointed Global Sector Head, Semiconductor Fabrications, John Lu, underlined the specific and complex logistics challenges the industry faces, notably those related to the efficient transportation of raw materials and the specialized care and precision required for the safe handling of sensitive products.

“Overcoming these challenges requires the expertise of logistics providers who can offer a comprehensive one-stop-shop service, including international and domestic transportation, equipment handling by technical experts, and project management through control tower resources,” the Austin, Texas-based executive explained.

He continued: “Manufacturers must coordinate parallel deliveries and collaborate with multiple suppliers to ensure smooth operations. Customers expect fast processing times, damage-free deliveries, supply chain visibility, and sustainable production and transportation practices.”

The trend towards local and omni-sourcing extends beyond semiconductors, as mining companies also seek to diversify their supply chains. “This shift was further highlighted during the COVID-19 pandemic, emphasizing the importance of omni-sourcing to reduce dependence on single markets.”

Historically, Asia, particularly China, South Korea, and Taiwan, has been the primary hub for front-end and back-end semiconductor manufacturing, supported by government initiatives.

However, in the post-COVID era, the US enacted the CHIPS Act to bring some of the manufacturing back to the country and mitigate geopolitical risks.

States such as Texas, New York, Idaho, Ohio, Oregon, and Arizona are actively seeking to benefit from the CHIPS Act.

In Europe, near-shoring is gathering momentum too with the European Chips Act establishing a framework for strengthening the semiconductor ecosystem in the EU and attracting considerable investment.

“The shifting dynamics of the semiconductor market have resulted in an increased need for logistics and transport solutions, driven by the establishment of new fabrication (fab) sites,” Lu noted.

“We are actively involved in fab construction projects worldwide, including key semiconductor hotspots like Idaho, Arizona, Ireland, Germany, and Texas. However, due to the confidentiality of our NDA agreements with customers, we are unable to disclose specific details.”

As chip technology advances, the complexity and scale of capital equipment and fab construction projects have increased, he explained.

“Our customers rely not only on our core logistics services, such as international and domestic transportation, but also our expertise in handling oversize cargo and special equipment.”

Commenting on the market in the EU specifically, Lu said the bloc is witnessing “exciting developments” in semiconductor investments. “Legacy IDMs (integrated device manufacturers) like Infineon are investing in new fabs in Dresden, Germany, while ST Micro is partnering with Global Foundries for a new fab in France. The formation of ESMC (the European Semiconductor Manufacturing Company), a partnership between TSMC Taiwan Semiconductor Manufacturing Company), Bosch, NXP, and Infineon, will ensure a stable supply of semiconductor chips for the European automotive industry.

“Additionally, Intel is making significant investments in Magdeburg, Germany, along with a new test and assembly facility in Poland, to strengthen its leading-edge fab in Ireland and establish a resilient and sustainable semiconductor supply chain in Europe, encompassing both the front end and back-end processes.”

Diversifying the Supply Chain

He also revealed that some of DHL Industrial Projects’ customers are in the process of reshaping their supply chains to be more diverse.

“This can be a logical move if it makes the supply chains more flexible and more robust. But that doesn’t mean these customers are taking their operations out of certain regions: In fact, growth decisions are made with a view to the resilience of the supply chain, which can mean that customers are prepared to open further locations in Vietnam, Thailand, and India (China + 1) in addition to their existing presence in China. Distributing risks reduces dependency on one supplier, one trade route or one mode of transport.”

Nevertheless, many components and parts continue to be sourced in China, its value chain being so deep and having such capacity that it would be very difficult to replace in the coming years, Lu observed.

“For the moment at least, we aren’t seeing any major shift toward a more regionalized economy on a global level. Some of our data even points to the opposite: in the first two years of the pandemic, trade flows covered greater distances than before on average.”

Another aspect of the re-shaping of supply chains in the semiconductor industry is the adoption of modularization which involves shipping fabricated units in a modular manner to reduce installation time and costs, particularly in low-cost areas with favorable climates such as Vietnam or Malaysia.

Modularization Demands on Forwarders

“Modularization in the semiconductor industry poses specific challenges for forwarders. These include the co-ordination of the transportation and delivery of modular units from various locations which can be complex; specialized handling: modular units often require due to their sensitivity and fragility; compliance: modular units may need to comply with specific regulations and standards during transportation, such as customs requirements and safety regulations,” Lu said.

Other challenges focus on risk management: modularization introduces additional risks in terms of logistics, such as potential disruptions during transportation or issues with module integration; supply chain integration: this becomes crucial and forwarders need to have robust tracking and monitoring systems in place to provide real-time visibility of the modules’ location and status; and integration and assembly: effective communication and collaboration with other stakeholders is required to ensure seamless integration and timely completion of the final product, he concluded.