John Campbell

Columnist

John Campbell

Economics & Business Editor, BBC Northern Ireland

Standing in Line

BBC NI’s Economic & Business Editor, John Campbell, discusses the surge in demand for semiconductors and the political impacts.

TSMC is not a company which will be familiar to many consumers. Even some of the discerning readership of this publication may not know what it does.

But it’s a business which is emblematic of the supply chain disruptions of these post-pandemic times.

It also sounds a warning about how climate change and geopolitics could cause much more serious disruption.

TSMC is the Taiwan Semiconductor Manufacturing Company and it is the world’s biggest contract manufacturer of computer chips.

Those chips are inside all sorts of consumer products, from cars to iPhones. There’s a very good chance you use its products every day.

Like lots of manufacturers it has seen very volatile demand from its customers as the pandemic did all sorts of strange things to economies.

The global semiconductor market actually shrank a bit in 2019 but in early 2020 it took off.

With much office work and education moving to the home, the demand for laptops, tablets and smartphones surged. The deployment of cloud systems also increased demand for high end server chips.

With people stuck at home, games consoles and smart TVs were also sought after and this surge in demand has persisted.

The US-based Semiconductor Industry Association (SIA) says worldwide sales of semiconductors hit $41.8bn in April 2021, a whopping 22% higher compared to April last year.

Annual global sales are projected to increase by 19.7% this year and a further 8.8% in 2022.

In a complex, capital intensive business like semiconductor manufacturing it is not easy to just turn on lots of extra capacity to address that demand.

So some customers have to wait and it’s mainly the car industry which is standing in line.

At the start of the pandemic demand for cars fell so manufacturers cut back on their semiconductor orders; then when demand bounced back strongly, the car companies found themselves at the back of the queue behind the consumer electronics industry.

This has had significant effect, with car manufacturers having to cut production and even temporarily close factories.

In turn this is feeding through to increased demand and price rises for second-hand cars as consumers baulk at the prospect of long waits for new vehicles.

A change in demand should go some way to easing this problem later this year and into next year. Official data already suggests that consumers are switching spending from chip-laden physical products into reopened services like hospitality.

In the medium term, supply will also be addressed: TSMC said in April it plans to spend $100bn over the next three years to increase capacity at its factories. Work has already started on a new facility in the US.

Its main rivals, Intel and Samsung, are also going to invest many billions. But this issue has highlighted is how dependent we all are on just a few large factories for such vital components.

And there are other aspects of the TSMC story which should give us pause for thought.

Aside from the pandemic-induced demand surge, TSMC has also been battling with a drought in Taiwan. The chip manufacturing process requires prodigious amount of water, so drought is bad news.

TSMC says that while supplies are tight its contingency plans, which include trucking in tankers full of water, means production has not been impacted.

But production was impacted in Texas, the centre of US chip

“In turn this is feeding through to increased demand and price rises for second hand cars as consumers baulk at the prospect of long waits for new vehicles.”

manufacturing, in February when a fierce winter storm knocked out parts of the state’s electricity grid.

Samsung and NXP were among the companies to temporarily stop production at their Texas facilities which only added to supply delays.

With climate change expected to increase the frequency and intensity of extreme weather events, these sorts of supply chain disruptions could become more frequent.

The consultancy firm McKinsey has carried out some recent work in this area and concluded: “Supply chains and the infrastructure that supports them are designed for a stable climate. As hazards evolve, it will be necessary to increase investment in adaptation, possibly at the expense of efficiency.”

Those adaptations could include disaster-proof plants and the stockpiling of key parts, which would run contrary to the just-in-time, lean inventory philosophy of much contemporary manufacturing.

The geopolitical supply chain risk in Taiwan is the fact that it’s a major area of contention between the US and China.

China considers Taiwan to be a breakaway province which it reserves the right to retake, by force if necessary. Taiwan’s leaders say it is a sovereign state, one that enjoys a security guarantee from the US.

In the opening days of the Biden presidency, China flew a large number of military jets into, or close to, Taiwanese airspace.

In response, US Admiral John Aquilino, head of the Pentagon’s Indo-Pacific command, warned that a Chinese invasion of Taiwan “is much closer to us than most think”.

In this context, we should see bipartisan support in the US for a vast public subsidy programme to boost semiconductor manufacturing.

Such a programme could see incentives of up to $52bn for domestic production.

This is not just about reacting to the post-pandemic supply crunches; rather it is a strategic move to increase US autonomy in semiconductors and hedge against the risk of a much worse relationship with China.

“Mr Justice Horner, Head of the Commercial Court in Northern Ireland, is driving Northern Ireland forward as a centre of excellence in commercial litigation and he is very keen to promote legal technology too,” Jonathan continues.

The establishment of a specialist group to deliver e-Discovery services which, in simple terms, is the process of legally reviewing and sharing electronically stored documents, traditionally in the context of litigation, is just part of the firm’s move to the digital side. The newly appointed Director of Innovation and Legal Technology, Kerry McCloy, and her initial team of eight are another facet to the digital evolution at the firm.

“We will be providing our document review services in the context of commercial litigation matters as well as regulatory investigations, data subject access and freedom of information requests, corporate due diligence, real estate lease review and in many other ways. The list is ever evolving,” says Kerry.

The new software has many efficiencies Jonathan says, and moves away from the traditional approach of engaging large teams to manually review a high volume of hard copy documents in cases. “This technology is not about replacing lawyers but about enabling them to do their job in a more efficient way. It allows us to deliver on time, on budget and deliver real value to our clients,” Jonathan is quick to point out.

And testament that tech is not and will not be replacing manpower, Kerry, who joined the company in April to head the Legal Technology Group at the business, explains: “Discovery is probably one of the most difficult, yet vitally important, aspects of litigation. It can be an onerous process. However, we can use the technology’s advanced analytics and search filtering technology to conduct early case assessment, identify patterns and trends in the documents at the outset and reduce the document pool to a much smaller, more manageable set for review. This presents the client with a high quality, more efficient offering in terms of time and cost.

“When the technology comes into play it allows our lawyers to focus on where they can add most value in the discovery process – the legal review and advising the client. It allows them to get to the most important documents faster, to get to the core of the issues in the case and in order for them to advise our clients.”

Kerry’s mission as head of the new Legal Technology Group at Cleaver Fulton Rankin will include the development of the department to leverage legal review technology in order to deliver bespoke, innovative solutions to clients, but she will also lead the digitisation of the firm’s other departments. “Our aim is to streamline and digitise our internal processes in order to drive efficiency gains and increase our capacity across all practice groups”.

“The obvious areas that will embrace e-Discovery first are litigation and dispute resolution which often involve large scale document reviews and discovery exercises, but we will also be using the technology and working with other practice areas across the firm including our employment team, for example, in responding to data subject access and freedom of information requests and the corporate team on due diligence matters,” she adds.

“New use cases arise all the time and there is no limit to the scope of the group. We very much see this as a growth area and fully intend to expand the team in the very near future. There is a huge market out there for these services.” Kerry adds: “We will be delivering our services to our Northern Ireland corporate clients and to those outside of NI.”

Cleaver Fulton Rankin is ahead of the curve when it comes to the employment of such tech and the introduction of a dedicated specialist team, Jonathan adds: “We are the first indigenous law firm that has decided to take this step,” he says. “And I strongly believe that, in time, this investment in our digital strategy will enhance our service delivery across our full suite of practice areas.”

It’s only the beginning of that technological movement too, he continues: “This is a very significant investment for us, in terms of people, technology and in training”.”

E-Discovery isn’t the first time the firm have embraced revolutionary technology. During lockdown, the firm made headlines when it led the way in alternative dispute resolution using the Consumer Code for Online Dispute Resolution (CCODR) platform, to resolve a client dispute using remote mediation and to deliver their legal services seamlessly and without interruption. It was the first here to do so. Launched in May this year, the CCODR platform enabled alternative dispute practitioners at Cleaver Fulton Rankin to work whilst practicing social distancing.

“Legal Tech is at the heart of our company and it has, undoubtedly, enabled us to streamline our services and grow our business. Legal Tech enables our company to compete with larger firms and deliver our legal services on time and on budget. Being the first to use the CCODR platform is one of many strategically important initiatives we have been involved in recently. We have ensured that all of our team has the ability to work remotely anytime, anywhere and developed e-playbooks for our transactional services. We are also the only law firm in Northern Ireland to offer client businesses a range of selfpaced eLearning courses delivered through Cleaver Fulton Rankin’s Learning Management System,” Jonathan continues.

“We saw an opportunity to create efficiencies and after a great deal of hard work, we have set up our Legal Technology Group, headed by Kerry, our Innovation and Legal Technology Director, being the first in the NI legal sector. She has hit the ground running and we are confident the Group will open up significant opportunities for us,” he adds.

An exciting and innovative time lies ahead for Cleaver Fulton Rankin.

“Legal Tech is at the heart of our company and it has enabled us to streamline our services and grow our business”.

AWARD-WINNING INNOVATORS

Belfast-based PAC Group has been awarded the 2021 Queen’s Award for Enterprise for Innovation, the UK’s highest accolade in recognising success in business. Received in recognition of the outstanding innovation and commercial success of their carbon composite hot drape forming technology, the Group support companies in the aerospace, automotive, and marine sectors with their innovative machines.

A total of just fi ve companies from Northern Ireland were awarded Queen’s Awards in 2021, with PAC Group being the only NI winner of the Innovation category, and the fi rst Northern Ireland Innovation category winner for three years.

Established in 2018, the electrical and mechanical engineering company have had a remarkable growth journey, doubling their turnover and employee numbers since 2019, and in 2020 investing almost £500,000 in a new premises in Dargan Crescent, Belfast.

Darren Leslie, Business Development Director at PAC Group, said: “We are thrilled to receive a Queen’s Award for Enterprise in Innovation. It is a fantastic endorsement for our company to be recognised as world-class, and it is welcome recognition of our team’s capabilities and hard work”.

Holding 42 patents on their preformer hardware and software, the team have designed, manufactured, and installed bespoke Hot Drape Formers for companies such as Spirit AeroSystems, the Advanced Manufacturing Research Centre in Sheffi eld, and McLaren Automotive.

Earlier in the year, PAC Group were also awarded the prestigious Platinum Level Innovator status from Innovate NI, the highest accolade available in the programme.

Congratulating PAC Group on its achievements, former Economy Minister, Diane Dodds, said: “As we emerge from the global pandemic, innovation will be vital to our economic recovery, and it is businesses like PAC Group who are leading the charge and using innovation to drive growth in their business.”

“Winning a Queen’s Award for Innovation and achieving Platinum Level Innovator status are major achievements and should be celebrated. I would like to congratulate the team at PAC Group for their hard-work, commitment, and drive, which have helped them to achieve commercial success and create real value in the global aerospace and automotive industries.”

Elwyn Agnew, Engineering Director at PAC Group, added: “We are delighted to have achieved these awards. We seek to collaborate with customers to help them fi nd cost-effective solutions to their problems using the latest technologies. Our team specialise in thinking differently – we are constantly innovating and coming up with new ideas, applications, and solutions to help our customers reduce process cycle time, streamline processes, improve output quality, and boost their bottom line.”

L-R: Elwyn Agnew, PAC Group Engineering Director, Dr Vicky Kell, Invest NI’s Director of Innovation, Research & Development, and Gavin Rankin, PAC Group Technical Director.

Dianne Dodds, the former NI Economy Minister and Darren Leslie, PAC Group Business Development Director.

For more information on PAC Group, visit www.pacgroup.co.uk. T: 02893 364600 | E: info@pacgroup.co.uk