An analysis of automakers navigating an evolving semiconductor landscape

Abstract

PurposeIn this paper, we investigate the coevolution of the supply network and procurement strategies in the context of semiconductors and electronics for the automotive industry over 3 decades. We aim to explain how procurement strategy interrelates with changes in supply network structure and what the implications of a hub-centric structure network structure are for procurement in supply.Design/methodology/approachWe collected in-depth primary and secondary data that stretched back to 1996 from a leading automotive European original equipment manufacturer (OEM) and its network. Using social network analysis (SNA), we identified OEMs’ procurement focus and mapped the evolution of the supply network, the links in the network, and the environmental forces impacting the strategies and the network.FindingsOur findings describe the supply network for semiconductor and electronic components to the automotive industry. The findings suggest that a focus on cost can lead to a Tier 1-centric network structure with many tiers that can fail to assure supply or capture innovation when the external environment is marked by high uncertainty. In such situations, increasing complexity by creating more links in the network can improve transparency and contribute to supply assurance and innovation.Practical implicationsThe findings indicate that managers should consider the role of the supply network in selecting their strategy to attain objectives of cost, innovation, and supply assurance.Originality/valueThis paper presents empirical-based insights into the automotive semiconductor and electronic component supply chain (SC), the unexpected implications of hub-centric supply networks, and the use of SNA in the SC in context.