Access to our favourite electronics may be interrupted as the increasing hazards caused by climate change could deliver a huge blow to the technology industry.
An August report by Mckinsey and Company has found the electronic industry’s supply chain is vulnerable to climate events. This means that long queues may not be the only obstacle when trying to buy the latest iPhone model.
Coronavirus has already demonstrated the fragility of our supply chains. Disruption was experienced across the world, effecting many industries. Companies were uncertain whether they could obtain raw materials, some saw their demand skyrocket, and shortages impacted the ability to ship their products.
The electronic industry was hit hard as household names experienced unprecedented disruptions. Both Apple and Samsung saw supply halter as their manufacturing factories were affected by the virus. Factories in China, where the majority of the iPhone manufacturing takes place, saw a shortage of components and raw materials.
Climate and disruptions
As electronic companies are picking up the pieces from the coronavirus blow, McKinsey analysts predict an increase in future interferences. Climate change has increased the frequency and severity of weather events. This has been too much for most manufacturing assets to handle.
It comes down to the location of these assets. The extraction of rare metals and the manufacturing of semiconductor chips are located in regions with high exposure to climate events.
Semiconductors sound as complex as they are essential to the industry. If you have an electronic device the likelihood is there is a semiconductor in it, from laptops to smartphones to even washing machines. These parts are manufactured in places which are highly exposed to climate hazards such as in Asia.
Jonathan Woetzel, a sustainable growth expert in Asia and contributor to the McKinsey report, warns of an overlap between the semiconductor manufacturing locations with hurricanes.
Woetzel says: “It’s essentially a higher level of risk across the board for pretty much everywhere that is exposed to a certain type of geographic risk. “
He continues, “On average, we are seeing… big disruptions that last for four to five weeks every five to six years. We think that number is going up.”
Climate interference
Climate disruptions are not unfamiliar to the tech industry. In 2011, floods disrupted hard drive production factories in Thailand. As one of the leading countries in manufacturing hard drives, there was global disruption. 25 per cent of the world’s hard drive production was offline and months of shortages followed.
Woetzel has noticed some changes in management practices as a result of climate awareness. Companies are now starting to look at the transparency in their supply chain, in addition to increasing inventory levels.
However, changes in the actual supply chain are lacking. He says: “We haven’t seen too much diversification purely based on climate. We haven’t seen people moving their supply chain out of what is a highly concentrated industry. Taiwan is a massive player, as is Korea, and that hasn’t fundamentally changed, at least not because of climate.”
On a knife edge
Despite technology being a concentrated industry, it has become globalised, meaning it is vulnerable to systemic hazards such as climate change. Woetzel says: “When one part of the system goes down it affects everything connected to it.” This could result in a knock-on impact experienced by the consumer.
However, there are companies trying to implement more sustainable supply chains. iameco sells sustainable, ecological, and high-performance computers. Project manager Jose Ospina says: “We review the entire supply chain of iameco computers with a view of sustainability, aiming to source materials that are renewable or recyclable, durable and…non-polluting.”
Ospina acknowledges that technology has a complicated relationship with the climate. He says: “Technology industries are one of the biggest drivers of climate change and biodiversity loss (e.g rare metal extraction, plastics use, etc).”
This has resulted in growing pressure for technology to contribute to the climate’s survival, not its demise. We have already seen pledges of Amazon, Microsoft, and Facebook to go carbon neutral or negative. Google claimed in early September that they have already offset their past emissions, but we are yet to see the full report.
However, with climate hazards increasing in the next twenty years, technology companies will face pressures to adapt as well as to mitigate. The August McKinsey report found that the probability of hurricane interruptions to semiconductor supply chains will grow two to four times by 2040, with some disruptions lasting months.
Woetzel’s aim for the report is to build a more resilient industry as technology provides goods and services that are needed by people and drive employment. He says: “I hope it informs a better decision-making process and that it allows for a fuller assessment of the risks.”