Editor’s note: This is the second article in a two-part series.
Critical materials such as minerals and chemicals come from many regions of the world in different quantities and many different suppliers.
Unfortunately, the deposits of many raw materials used in our industries come from regions affected by regional and national conflicts, some of which have been going on for many years.
That’s why both the U.S. and the EU have legislation restricting trade with those areas, classifying the products as conflict materials.
The U.S. Office of Foreign Assets Control can sanction any U.S. individual or corporation that trades directly or indirectly with entities in specific geographic regions or with certain governments. The sanctions also apply to trade with entities or individuals listed in the Specially Designated Nationals and Blocked Persons (SDN) List, which contains over 8,000 names of companies or individuals connected with sanction targets.
Additionally, the new European Union Conflict Minerals Regulation came into effect last year. The legislation directly applies to companies that import minerals into the EU, no matter where they originate.
While most restrictions apply to conflict materials coming from African countries, especially from the Democratic Republic of Congo and North Korea, the list is constantly changing and now includes some areas of Eastern Europe.
For many manufacturers, designing for availability is critical
According to the Wall Street Journal, “Tesla has been able to keep production lines running in part by leaning on in-house software engineering expertise that has made it more adept than many rival automakers at adjusting to a global shortfall of semiconductors.”
Tesla quickly rewrote the software required to incorporate alternative chips into its automobiles. In Q4 2021, Tesla produced a record 308,600 cars and reported that deliveries in the year were 87 percent up from 2020 levels.
Increasing supply droughts have demanded manufacturers and OEMs to pivot their R&D teams to redesign existing revenue products to support revenue generation and end-customer requirements. Customers are reaching out to distributors and external design firms to augment their development teams and drive assistance on redesign and new product development.
“Designing for availability comes into play when there’s already a supply disruption, and the company needs to make urgent, targeted product adjustments to rapidly respond, using available components,” said Bain & Company’s Peter Hanbury, Bill Radzevych, and Benjamin Grant in Harvard Business Review. “How can companies strengthen their design-for-availability muscles? One useful tactic is to continue using agile teams in other strategic ways even after the supply shock has passed.”
“The current semiconductor supply constraints require customers to consider redesign to sustain for revenue protection,” said Aiden Mitchell, senior vice president of engineering services at Arrow Electronics. “Customers are engaging our eInfochips engineering service business on both new product development and sustaining existing products. They are working in dynamic environments. Our customers are de-risking operations by updating mature products with high revenue to avoid supply obstacles, price increases, and the risk of obsolescence. The work expands hardware and full software stack design.”
Globalization is crumbling
The pandemic has exacerbated the current trade war between different regions, making global trade much more complicated. Now, when the world was hoping to recover from the economic effects of Covid-19, new challenges appeared.
There is a global consensus that no forecast is likely to be accurate in the long term, and economic indicators are just a reflection of current affairs.
The uncertainty of current global events makes it extremely difficult for manufacturers and governments to prepare and invest.
Additionally, the pressure on energy markets could reverse the trend of shifting to more sustainable energy production. U.S. Secretary of Energy Jennifer Granholm told oil executives in Houston that the country was now on a “war footing,” as she called for an immediate increase in oil production to avert a price spike.
Global cooperation is essential. There is no way the West can recover without the East, and vice versa.
In the words of Simon Segars, “That is the challenge that the industry is stepping up to. And in collaboration, across suppliers and customers and governments, we absolutely have to get it right!”