Blockchain in the Semiconductor Industry: 5 Innovative Use Cases Gaining Traction

Jan 13, 2022

High-Tech | 6 min READ

According to Reportlinker research, the semiconductor silicon wafer market stood at $9.85 billion in 2019 and will reach $13.64 billion by 2025, with a CAGR of 6.18% between 2020 to 2025. Such promising havens have only accentuated the need to integrate semiconductor companies' business processes with the blockchain, which is far more secure, transparent, and encrypted at the same time. While blockchain technology is still in the early stages of development, it is poised to aid manufacturers in decreasing costs & counterfeits and enhance visibility into the value chain.

Nitesh Mirchandani

VP and Global Head

Communications, Media & Technology (CMT)

Birlasoft

Rajan Kashyap

Head of Digital Solutions, Europe

Birlasoft

Blockchain in Semiconductor Industry

With semiconductors evolving as the building block of all hi-tech products such as smartphones, appliances, etc., the innovations and advancements in this field directly impact all allied segments. With digitization and electronic mobility being the current trends in the technology landscape, semiconductors are finding applications in many devices. As the demand grows multifold, so will the complexities in the manufacturing & supply chain.

Enter blockchain, which has the potential to help ease many manufacturing pain points. Blockchain's distributed functionality, bundled security measures, and inherent features such as smart contracts, assist manufacturers in tracing goods, managing records transparently, and automating supply chain processes & payments. It also enhances collaboration among suppliers, manufacturers, and customers. In addition, integrating blockchain with IoT allows semiconductor companies to improve their predictive maintenance capabilities.

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Blockchain Use Cases in Semiconductor Industry

Blockchain sets the stage for semiconductor manufacturers to enhance collaboration among suppliers, manufacturers, and customers. It helps protect IP, streamlines the supply chain and inventory replenishment, improves tracking and regulatory compliance, and reduces counterfeiting. By blending IoT with blockchain and AI/ML, Semiconductor companies can reduce batch-based updates and increase transparency & harmony in the value chain. Let's take a deep dive into each use case.

#1 Blockchain for Supply Chain Visibility

Both COVID and recent semiconductor shortages have underscored the need for deep insights on the immediate supply chain and the supplier's supply chain down to the source. The blockchain does just that, bringing all the stakeholders under one unified platform and enhancing transparency. The threat of disruption can be eliminated when there is clear visibility through multiple levels, from manufacturers to distributors and repair shops. As a result, the global blockchain supply chain market is slated to grow from US$253 million in 2020 to US$3,272 million by 2026, at a CAGR of 53.2% during the forecast period, according to the Markets & Markets report.

Implementing blockchain solutions help semiconductor companies to record price, date, location, quality, certification, and other relevant information to manage their supply chains effectively. The availability of this information within blockchain increases traceability of the material supply chain lowers losses from the counterfeit and gray market, improves visibility & compliance over outsourced contract manufacturing, and potentially enhances a semiconductor company's brand equity in the market.

Moreover, combining blockchain technology with Radio Frequency Identification (RFID) tag equipment enhances the visibility of wafer electronics along the supply chain. It helps verify the sources of raw material origins from the supplier, track & trace materials with unique data ID, and detect counterfeits if any.

Data is written onto an RFID tag, which can be encrypted and published through blockchain technology. Merging the blockchain technology with RFID tag equipment lets the manufacturers, suppliers, distributors, transporters, and customers create a single source of trusted information mechanism in the supply chain.

#2 Blockchain for Enterprise Collaboration

Businesses have started leveraging blockchain's intrinsic traits into their operations, such as security, integrity, and transparency. The versatile nature of blockchain permits companies to collaborate safely with business partners in a shielded environment. Blockchain solutions synchronize data between business partners, creating a shared and immutable record of data and transactions.

Acting effectively as a 'middleware' enables confidential and complex collaboration between enterprises without leaving any sensitive data on-chain. The blockchain network safeguards the privacy of all of the parties involved and strengthens the security and credibility of the transaction.

Offering stakeholders access to the same information in real-time, blockchain develops a trusted environment among the partners by sharing verified information on a shared ledger. This creates newer opportunities for semiconductor enterprises as well as their suppliers and assists them in navigating new value for many years to come.

#3 Blockchain for Business Process Transformation

Blockchain technology contains a record of all transactions happening in a peer-to-peer network. With each occurrence of a new transaction, data transferred through blockchain gets encrypted, making the entire ledger highly secure. Looking at the promising avenues, many businesses have already started using blockchain as part of their business process transformation strategy. One of the biggest use cases in this journey has been blockchain-based tracking of raw materials & finished products, providing detailed tracking information to all stakeholders within the supply chain.

Another blockchain feature that businesses are fast exploring is the smart contract. The smart contracts get automatically executed when predetermined conditions and terms are met satisfactorily. According to Gartner, the business value of blockchain will exceed $3.1 trillion by 2030, and this augurs well for the early adopter semiconductor industry to integrate enterprise-wide secure blockchain networks into their existing technology platforms and scale their businesses rapidly.

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#4 Blockchain for Data Monetization

There is no 'central' data controlled by one organization with a distributed record system in the blockchain network. As no single central data store is open to external attacks, security grows manifolds. Once data gets embedded onto the chain, it cannot be changed. Blockchain integrates best-of-breed cryptographic mechanisms, which guarantee the network participants' digital identity and secures the stored data's privacy to enable role-based data access. Additionally, smart contracts – embedded business logic – can be added to a blockchain, which enables the automation of many processes and secures the handling of contracts. The application of smart contracts automatically structures that data into a digestible format, eliminating manual re-organization. Offering all the stakeholders in the value chain greater visibility into the data, the distributed ledger enhances transparency, data distribution timeliness, information sharing, and data access.

#5 Blockchain for Counterfeit Equipment and Material Identification

Companies have been combating counterfeiters for years, investing significant time and resources to guard against the risk of defective and fake parts entering the production system and to prevent clever look-alikes and reverse-engineered goods from stealing sales. According to a BCG study, counterfeit parts cost component manufacturers about $100 billion annually in the electronics industry. The Semiconductor Industry Association estimates that semiconductor manufacturers lose $7.5 billion in revenue to counterfeiting each year.

A study by OECD stated that counterfeit & pirated goods accounted for $461 billion in worldwide trade. That's about 2.5% of global GDP, which doesn't include untold additional costs from the threats counterfeits may pose to the recipients' health, safety, and security. The use of smart tags and blockchain allows supply chain partners to verify a product's authenticity quickly. Even if a smart tag can be copied, the information on the blockchain will remain unchanged. A scan of the item will exhibit the exact location of manufacturing and sale, exposing the duplicate item as a fake. Advances in blockchain-with-IoT counterfeit detection provide visibility in tracing and recording of provenance data from source to sale.

Blockchain provides an immutable, permanent digital record of materials, parts, and products, augmenting end-to-end visibility to all the stakeholders in the semiconductor value chain. Reducing costs & time by eliminating the need for third parties that manage ledgers and transparent transactions ultimately improves the profitability of semiconductor companies.

The ability to support Smart Contracts, such as on the Hyperledger Fabric and Ethereum platform, is opening possibilities for speeding commerce and reducing costs. As edge computing and blockchains advance in capability and become integrated or interoperable, semiconductor companies would achieve peak efficiency and flexibility. In short, blockchain is set to empower the semiconductor industry to expand business horizons.

This article was first published in Manufacturing Leadership Council insights.

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