In the Face of Escalating Trade Wars, Semiconductor Industry Must Evaluate Supply Chain Design Process

Escalating trade wars are highlighting the need for companies to protect technological advantages in critical industries, including semiconductor manufacturing. However, according to CoLab, a technology company that develops collaborative design review and AI solutions for hardware engineering teams, outdated approaches toa data sharing during the product design stage are leaving many businesses vulnerable to intellectual property (IP) leaks, compliance violations, and restrictions to specialised knowledge that spurs innovation.

Risks to IP and compliance

As a vital technology underpinning products from artificial intelligence (AI) to aerospace and defense—semiconductor manufacturing is governed by export controls, including the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR). These regulations are necessary but do create considerable challenges for semiconductor machinery manufacturers such as ASML, Applied Materials, and ASM, as certain technologies that facilitate the manufacture of particular chip types are regarded as essential to national security priorities. For example, Dutch company ASML is subject to export controls on extreme ultraviolet (EUV) lithography machines, which are critical for manufacturing chips for AI or advanced logic. 

Export controls don’t just apply to the machines themselves, but also to product data like engineering drawings, specifications, software, and technical documentation. At the same time, a single machine can have tens of thousands of components sourced from thousands of different suppliers who need access to engineering data to provide pricing, assess designs and provide technical feedback to ensure the quality of parts.

“As trade wars lead to increased competition and sensitivity around technology development and commercialisation, countries are understandably becoming more protective of IP to maintain a competitive edge,” says Adam Keating, CEO and Co-Founder of CoLab. “To comply with export controls and protect IP, companies either need to redesign supply chains to work with domestic suppliers or they need to ensure they have tight control and full transparency over who has access to what data in existing supply chains. Many companies are a long way off this type of data control, which is exposing them to huge risks.”

The problem with current data sharing methods

Failing to share engineering data with essential suppliers is not feasible, but neither is disclosing every piece of information. In the recent survey conducted by CoLab, only 6% of engineering leaders thought suppliers should have complete access to Product Lifecycle Management (PLM) systems and fewer still, 4%, thought suppliers should have no access. Most engineering teams routinely conduct reviews outside of PLM, sharing engineering data either via email, or file transfer protocol (FTP). Email provides little security and no traceability: once data has been shared, it is  impossible to revoke access. 

Recognising the flaws in this approach, some companies have begun to build inhouse solutions, including FTP sites. While these are more secure, they are often slow, and are not capable of handling the volume of design review participation and technical complexity required to support advanced product development.

“We’re not just talking about sharing engineering data – but also communicating design intent and exchanging feedback,” continues Adam. “The right solution needs to be able to handle the entire technical decision making process end to end or else teams will find workarounds, which creates compliance and IP risks all over again.”

“The problem is that, while solving a file sharing issue might sound simple on the surface, it’s incredibly difficult in practice,” adds Jeremy Andrews, CTO and Co-Founder of CoLab. “If each company tries to build its own solution, they stand to waste a huge amount of IT resources, which would be far better used elsewhere, and still not end up with a workable solution.”

Rethinking supply chains in the US

Despite over 40 countries subject to expanded US export controls on semiconductors and related equipment, switching to domestic-led supply chains is not an easier option. Estimates reveal up to 57 countries are involved in different stages of the semiconductor design process. And while there are widely publicised investments to boost semiconductor manufacturing in the US, including $100 billion from Taiwanese Semiconductor Manufacturing Company (TSMC), there are also reports of large skills gaps that will hamper this effort, with Deloitte warning that the US semiconductor industry could be short of up to 90,000 workers over the next few years.

“The reality for many manufacturing companies - in the semiconductor industry and others - is that valuable technical knowhow mostly lives in people's heads. It's not documented," says Adam. “If companies look to shift to more domestic-led supply chains, they’ll not only have to assess and onboard hundreds of new companies, but they’ll need to ensure specialist knowledge is passed over, potentially to less experienced teams, which could have an impact on speed and quality, and therefore competitiveness.”

A new approach

Recognizing the challenges of mitigating compliance risk without sabotaging competitiveness, companies like ASM have partnered with third party technology providers to implement advanced data sharing solutions. A Design Engagement System (DES), developed by CoLab, eliminates the need to download technical data from an FTP site, integrates with PLM systems and enables companies to implement attribute based access controls (ABAC) and to automate user provisioning from PLM or Enterprise Resource Planning (ERP). Managing access controls is particularly important when considering frequent changes in personnel. In a 2023 presentation at Siemens Realize Live, an analyst from ASML revealed that its PLM team has to change permissions for over 100 users per day.

By providing a complete history of design review feedback, DES systems also help businesses protect specialist knowledge and upskill and onboard new employees quickly. For companies looking to redesign supply chains to build resilience in the face of trade wars, a DES system can facilitate the technical evaluation of hundreds of suppliers.

“If companies fail to adopt a secure, efficient design review process they risk handcuffing engineering teams, slowing down the engineering process, and disincentivizing  teams from seeking supplier expertise,” concludes Adam. “A DES system provides a secure and seamless experience, putting it far ahead of traditional methods, and sets semiconductor engineering teams up to design the fastest chips with the largest capacities - the ultimate goal.”