A global shortage of semiconductor materials and breakdown of semiconductor supply chains since the Covid-19 pandemic has created major problems across industry sectors. New research published in Sustainability in 2023 proposes a blockchain system that could fix the broken supply of semiconductors.
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What is blockchain technology?
Blockchain technology is a decentralized and secure system that enables the secure transfer of digital assets between users without the need for intermediaries such as banks or financial institutions. It is essentially a distributed digital ledger that records transactions in a verifiable and tamper-proof manner.
At its core, blockchain technology consists of a network of nodes that collectively maintain and validate the ledger. Each block of data in the chain is encrypted and contains a unique code or hash that is linked to the previous block, creating a chronological chain of blocks that is immutable.
Due to its decentralized nature, the blockchain is highly secure and resistant to tampering or hacking. This makes it a valuable tool for a wide range of applications beyond just financial transactions, such as voting systems, supply chain management and even identity verification.
One of the most well-known applications of blockchain technology is the cryptocurrency Bitcoin, which uses blockchain to enable secure and transparent peer-to-peer transactions without the need for a central authority. However, blockchain technology has many other potential uses. These include applications in complicated supply chains, such as for semiconductors.
How did semiconductor supply chains break down?
Semiconductor materials have properties of both a conductor (a material that easily allows the flow of electricity) and an insulator (a material that does not allow electricity to flow). They have a unique ability to conduct electricity under certain conditions and act as an insulator under other conditions.
The most commonly used semiconductor materials are silicon and germanium, which are used in electronic devices such as transistors, diodes and integrated circuits. These devices are the building blocks of modern electronics and are found in everything from smartphones and laptops to cars and medical equipment.
Semiconductors are essential to the manufacture of electronic devices because they allow precise control of electrical current, making it possible to create and manipulate signals in a variety of ways. This is why the failure of global semiconductor supply chains has caused major problems across industries since 2020.
The Covid-19 pandemic caused a sharp decline in car sales in the spring of 2020, causing car manufacturers to cut their orders for all parts and materials, including the pieces needed for various functions. When demand for passenger cars picked up towards the end of 2020, chip manufacturers were already obliged to supply their large customers with consumer electronics and IT.
This shortage of semiconductors has become a key area of international conflict due to geopolitical factors and trade policies, resulting in disruptions in the semiconductor supply chain. The shortage was exacerbated by events such as fires in Japanese factories and limitations in the global transport system. Companies had to pay premiums for shipping, and air freight faced higher demand due to global shipments of the Covid-19 vaccine.
In 2021, the US Department of Commerce launched a request for information on the semiconductor supply chain, targeting all stakeholders involved in the semiconductor supply chain. In September 2022, the United States passed the CHIPS and Science Act, investing more than US$50 billion in manufacturing and research and development (R&D) for the semiconductor industry. The legislation also sets out restrictive provisions to affect the optimized structure, security and stability of the global semiconductor industrial and supply chain.
Blockchain Proposal to Fix Semiconductor Supply
In a recent study published in the journal Sustainabilityeconomists and mathematicians from the Chinese Academy of Sciences, Beijing, proposed a blockchain system that can solve the semiconductor supply chain problem.
The study integrated two blockchain methodologies – stochastic programming and robust optimization – to analyze the conversion of capacity across different semiconductor product types.
Stochastic programming is a mathematical optimization technique used to solve problems involving uncertainty or randomness. It involves including probability distributions in the optimization model, so that decision-makers can take into account the probability of different outcomes and make more informed decisions. This technique is particularly useful for complex decision problems in industries where future events are uncertain and decision makers must consider a wide range of possible outcomes. Stochastic programming can help improve decision making by providing a more comprehensive assessment of risk.
Robust optimization is another mathematical optimization approach that seeks to find solutions that are robust or resistant to uncertainties and variations in input parameters. Robust optimization involves modeling the uncertainties and variations in input parameters as sets, and then identifying solutions that are feasible for all possible values within these sets. This approach can help decision makers make better decisions in situations where input parameters are subject to variations or uncertainty, and can help ensure that solutions are more reliable and effective over a range of different scenarios.
The resulting two-stage mathematical planning model aimed to maximize the producers’ net profit. By leveraging the power of blockchain technology and information sharing between enterprises, the research team improved the efficiency of their model, achieving theoretically optimal allocation of long-term capacity planning.
On paper, the resulting blockchain system could solve the problems set out by the research team. However, there are still significant real challenges to implementing such a system. The first is to get buy-in and resource capacity from all relevant stakeholders to share information effectively – around the world. This is a big task with a lot of uncertainty.
Second, blockchain technology has been criticized for its high energy and computing power costs. It is computationally difficult to run complex algorithms with large amounts of data, and critics claim that there is currently no sustainable way to use blockchain.
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References and further reading
Li, R. (2023). Why the semiconductor supply shortage is here to stay. [Online] National interest. Available at: (Accessed 13 March 2023).
Schinkus, C. (2020). The Good, the Bad and the Ugly: An Overview of the Sustainability of Blockchain Technology. Energy research and social science. doi.org/10.1016/j.erss.2020.101614.
Vakil, B. and T. Linton (2021). Why we are in the midst of a global semiconductor shortage. [Online] Harvard Business Review. Available at: (Accessed 13 March 2023).
Yang, J., et al (2023). Blockchain-based long-term capacity planning for semiconductor supply chain manufacturers. Sustainability. doi.org/10.3390/su15064748.
Shin, B., et al. (2020) Mitochondrial oxidative phosphorylation regulates the fate decision between pathogenic Th17 and regulatory T cells. Cell reports. doi.org/10.1016/j.celrep.2020.01.022.
Pesheva, E. (2020). Fighting coronavirus. [Online] Harvard Medical School. Available at: (Accessed 26 February 2020).
