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Global electronics industry at threat from semiconductor supply chain risks

16 Mar 2023

Lloyd’s and WTW report

  • Second joint report in ‘Rethinking supply chains’ series - ‘Loose connections: Rethinking semiconductor supply chains’ – highlights macro challenges for the $600bn industry, the risk maturity, and the growing interest in getting ahead of their supply chain risks
  • The report aims to raise the insurance industry’s understanding of the semiconductor sector and increase awareness, availability, and uptake of supply chain risk solutions by clients
  • Analysis is based on the surveys and interviews of over 140 risk, supply chain, and insurance practitioners across North America, APAC, LATAM and Europe, to understand the specific needs of the semiconductor industry
  • The report follows on from: From farm to fork: Rethinking food and drink supply chains, which recommended three steps to advance the insurance industry’s supply chain risk solutions:
    • Explore product innovation opportunities
    • Enhance data sharing across supply chains
    • Increase communications between supplier and insurer


Lloyd’s, the world’s leading marketplace for commercial, corporate and specialty risk solutions has today published a report on the risks to semiconductor supply chains - an industry estimated to have a market value of nearly $600bn and supporting a $2.2trn electronics sector that in turn drives almost $90trn of global GDP.

Semiconductors are the chips that enable the electronics industry and are found in vehicles, mobile phones, medical technology and even power the clean energy solutions being used to enable a sustainable future, such as solar and wind farms. Due to the complex and global nature of the sector, it is subject to a multitude of risks including geopolitical tensions, earthquakes, and extreme weather, with manufacturing plants predominately located in East Asia.

The report: Loose connections: Rethinking semiconductor supply is the second in a series of three exploring supply chain risk, delivered in collaboration with WTW.

The report finds that the sector is most concerned by the medium-term risk landscape, which is where significant scope exists for increased collaboration between the industry and their insurers to address protection gaps. Of survey respondents in WTW’s Global Supply Chain Survey, 81% said a lack of insurance solutions was among the greatest challenges in the medium term, sending a clear signal to insurers that the industry requires partnership to transfer risk.

Those interviewed also highlighted eight key supply chain risk drivers: economic pressures, supply and demand changes, talent and labor, raw materials and components, technology, packaging and transport, regulatory/geopolitical/political risks and climate change and sustainability.

These risk drivers matched those of the food and drink industry, which favoured end-to-end supply chain coverage. In contrast, the semiconductor industry recognised large financial exposures in their supply chains which traditional risk transfer cannot currently meet, and so favoured risk transfer at key moments in their chain.

By adopting a customer centric view of risk, the semiconductor industry could act as an example of a resilient, digitalised supply chain in a connected world – with data and tailored insurance solutions used to supplement businesses’ retained risk.

“The semiconductor industry is acting now to respond to global demand and spark technological innovation. While the sector is mature in its approach to risk management, there are always unforeseen events that can impact production.

The insurance industry has a critical role in partnering with semiconductor businesses to help them build resilience to manage the supply of mission critical products and to keep our digitally connected world turning.”
Rebekah Clement - Director of Sustainability, Lloyd’s
“Global supply chain complexity continues to increase, whilst transformative technologies powered by semiconductors are driving rapid change and progress in many areas. Like many other businesses, Semiconductor companies are aware of their supply chain vulnerability and are actively working to increase their resilience. For the gaps, they are looking to the insurance industry to partner.

At the moment, insurances cover only small parts of the supply-chain risks. The solutions provided by our industry provides only a wafer-thin patchwork of protection. Semiconductor businesses need to explore different ways to manage the significant financial exposures to achieve true resilience. Traditional risk transfer will only be one component of achieving that.”
Hugo Wegbrans - Global Head of Broking, WTW

Notes to Editors

  1. Lloyd’s and WTW have collaborated on a three-part series exploring supply chain risk. Report three on the transport and logistics sector will be published later this year.
  2. The semiconductor industry is estimated to have a market value of nearly $600bn USD and supports a $2.2trn USD electronics sector.
  3. Behind this report are the surveys and interviews over 145 risk professionals from across the semiconductor sector. These perspectives have provided real-life, practical insights into the challenges that companies are facing now, and what they expect to face in the future.
  4. The survey was conducted across November-December 2022. It was developed specifically to profile semiconductor companies and the ways they think about supply chain, including how they: identify their risk needs, protection gaps and future insurance opportunities. Alongside this, select semiconductor companies were interviewed 1:1 in confidential meetings to allow them to express further thoughts
  5. Futureset is Lloyd’s global platform and community dedicated to driving greater societal and economic resilience to the world’s most challenging risks. By bringing together diverse perspectives, and through cutting-edge risk insight, intelligence, and cross-industry dialogue on the most complex and fast-changing risks faced by communities, businesses and countries, Lloyd’s Futureset aims to build greater societal understanding and collaboration to find solutions and support greater preparedness, protection and resilience.
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About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.

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