Semiconductor shortage: the Achilles' heel of the Vaud miracle?
A favourite expression has been slipping into conference talks of late, suggesting that our canton has finally emerged from crisis: "the Vaud miracle". Respected experts are spreading the word. The CVCI even produced a report entitled "From the subprime crisis to Covid: the Vaud miracle". The introduction of this downloadable document highlights that over this difficult period spanning some fifteen years, the canton's GDP grew by 41.9% and employment by 31%... Cynics will call it a catch-up effect, but let us not spoil the moment: these results are better than those of the country as a whole, and above all place our canton among the world's top performers over the same period. From a macroeconomic standpoint, analysts therefore have every reason to celebrate not only the resilience but above all the good health of the Vaud economy. But there is a catch.
A global sectoral crisis on the horizon
Microeconomic data can sometimes throw up signals that do not corroborate the overall picture. And sectoral crises, if not taken seriously, can have consequences that affect the companies involved — and could even ripple through the broader economy in a domino effect. To put it plainly, the entire world is currently facing a semiconductor shortage. This is widely known, and some policymakers have acknowledged the gravity of the situation while attempting to reassure. Thierry Breton, the European Commissioner for the Internal Market, sought to be reassuring by stating a few days ago that the "peak was behind us"; he nevertheless conceded that the crisis could last several more quarters before things return to normal. For readers who think this crisis does not affect them, and to grasp just how serious the situation is, they should know that semiconductors are silicon-based materials on which electronic processors are engraved. They are found almost everywhere: in smartphones, cars, computing, but also in electronics and watchmaking.
Vaud innovation in the crosshairs
Returning to the CVCI and BCV analysis, machinery, instruments and watchmaking accounted for 15,141 jobs in 2005 and 17,448 in 2020. While the employment indicator appears encouraging, the same cannot be said for the GDP indicator: over the reference period, value-added growth fell by 13.2%.
As everyone knows, the canton of Vaud is home to a wealth of innovative companies whose core activity is subcontracting. This is the strength of our region, as the media rightly and repeatedly tell us. One thinks of cantonal flagships such as Ecorobotix, Astrocast or Flybotix, companies that have recently attracted attention for their innovations. Yet no one has thought to analyse the vulnerability of this sector, nor the fact that this innovative industry — of which we are so proud — feeds primarily on engineering developments and microcontrollers. In other words, these firms devour semiconductors... and may soon find themselves starving.
SMEs facing this situation are suffering the consequences of the shortage: they find themselves unable to fulfil orders and therefore unable to deliver to their end clients, resulting in lost contracts and lost revenue. The penalty is immediate. And in the face of this, no form of state aid seems capable of making a difference. The market is merciless.
Why this shortage must be taken seriously
You may think the crisis affects all sectors, and that other industries are dealing with more general material shortages. This is indeed the case for many construction contractors, for instance, who are running short of timber or aluminium components. The difficulty also affects all entrepreneurs who are forced to pass on soaring costs to their end clients. But a far more serious problem exists: components that simply no longer exist, because they are out of stock, completely unavailable, or available only with absurd lead times of more than 18 months. Companies may be forced to reduce orders, delivering only the rare parts available on the market. Clutching at straws, some entrepreneurs turn to brokers or the grey market — and in doing so take risks, sometimes ending up with counterfeit parts. At the same time, it is vital to be able to give credible delivery timelines to avoid repeated and uncontrolled postponements.
While some large groups have the stock levels and financial resources to weather the storm, SMEs find themselves in inextricable situations. It is therefore the entire fabric of Vaud's innovative businesses that is threatened by the spread of this semiconductor crisis, and no one seems to have grasped the full gravity of the situation. Yet properly understanding the stakes and identifying the dangers would allow for a better response and greater adaptability.
Collective action to adapt
One avenue worth exploring is mutual support: the creation of a shared database listing all buffer stocks held by SMEs collectively, making them available to those with urgent needs who wish to purchase them. This is the best short-term solution available. In the longer term, a strategic reflection on domestic semiconductor production will clearly be necessary.
If it is not taken seriously, this crisis could well become the Achilles' heel of the Vaud miracle. The ecosystem of innovative SMEs that rely on these precious electronic components has taken years to build. Most of them are in the middle of an innovation race — a very different situation from that of a craftsman who will always have roofs to build once timber becomes available again. They cannot afford any weakness in their development. And the material shortage they are currently suffering, if not openly denounced and vigorously addressed, could prove fatal to the entire ecosystem. It is therefore urgent to act collectively before it is too late — or to hope for... a miracle.
