GRAHAM SCOTT, Vice President of Global Procurement at Jabil
The semiconductor industry has faced highs and lows in recent years, grappling with slow economic performance and geopolitical tensions that have disrupted supply chains. Despite these challenges, 2025 promises growth driven by the surging demand for AI technologies.
Nevertheless, the semiconductor market remains cyclical, influenced by economic trends, new product launches, and technological innovations. Although they have returned to pre-pandemic levels, lead times can fluctuate rapidly with market changes. The semiconductor manufacturing process remains lengthy due to extensive production and process cycles. This has resulted in low “good inventory” levels and capacity utilization below optimal levels. While distribution inventory appears stable, the inventory mix reveals a higher percentage of non-cancelable, non-returnable (NCNR) parts, which may not have substantial demand moving forward, posing challenges.
Trade disputes, geopolitical factors, and macroeconomic conditions also impact demand and supply, contributing to the cyclical nature of lead times. For instance, U.S. and China tensions are reshaping global supply chains. Many Asian semiconductor suppliers are relocating operations from China to Malaysia, Thailand, and the Philippines to diversify global production and reduce geographic risk. However, China remains a key player in the global supply chain, both in China-for-China manufacturing and China for the rest of the world.
At Jabil, we foresee a potential “perfect storm” from additional unplanned demand or significant disruptions to global supply chains. These disruptions extend beyond physical product movements to include geopolitical issues like trade and tariffs, import or export restrictions, and an increasingly complex trade model with China. Lower inventory levels, short lead times, high book-to-bill ratios, and reduced factory output set the stage for rapid market changes that could upset the current supply and demand balance.
Additionally, suppliers are currently offering competitive prices to maintain market share, making 2025 a buyer’s market for semiconductor contracts. However, the rising costs of raw materials, labor, freight, and foundry services could see increased component prices become more prevalent.
Strategic approach to supply chain resilience
Navigating semiconductor complexities requires agility and forward-thinking. Unexpected swings in demand or geopolitical challenges can disrupt production schedules and inventory levels. To mitigate these risks and maintain operational continuity, manufacturers need to build resilience into their strategies.
Building strong relationships with suppliers comes first and foremost. Supplier relationship managers and commodity managers should understand suppliers’ motivations and needs. In constrained markets, suppliers are more likely to support those who prioritize their interests. Effective supplier relationship management involves understanding suppliers’ strategies, investments, and goals, and engaging with their C-suite to align mutual interests.
To enhance supply chain resilience, consider implementing these additional strategies:
- Enhanced demand forecasting: Providing suppliers with visibility into product lifecycles is important for their component lifecycle planning. Despite thorough planning, unforeseen challenges will arise. When they do occur, leverage the relationships and expertise of your procurement team to respond effectively, relying on their experience in handling past challenges.
- Strategic inventory management: Maintain safety stocks of critical components and adjust them regularly to balance supply and cost. To achieve this, it’s important to understand the strategies of suppliers and customers. Develop an inventory strategy that aligns with these requirements by knowing the supply base and the nodes they manage. Some parts may require safety inventory, while others might have ample options or channel inventory available.
- Multi-sourcing for resilience: A diversified supply base is crucial to strengthen supply chain stability and mitigate the risk of shortages. Consider the technology adopted in your products and understand the entire supply chain of your suppliers to identify potential disruptions. Ensure your suppliers have multiple supply chains to support their operations, with multi-location manufacturing for each part. This approach ensures a cost-competitive supply base and better availability of components, increasing the chances of success in constrained markets.
By implementing these strategies, businesses can ensure a stable supply of essential components, meet the dynamic needs of the semiconductor industry and enhance overall supply chain resilience.
About the author
Graham Scott leads an enterprise-wide organization located in the Americas, Europe, and Asia that is responsible for Jabil’s global commodity management, centralized procurement and quoting, as well as supplier relationship management. Graham’s team delivers value and enables growth for Jabil’s customers by analyzing commodity market trends, pricing, capacity and supply/demand models. Under his leadership, the Supplier Relationship Management (SRM) program focuses on the long-term vision and partnership growth with Jabil’s key strategic supply base. Graham joined Jabil in 2004 and has amassed over 25 years of experience in the EMS industry across various procurement, supply chain and commodity management positions. Graham has lived and held leadership roles in Europe, Asia, and the U.S. over the course of his career.
