How our suppliers make us strong: Insights into the SMT supplier network

The semiconductor market is humming: The world is experiencing another digitalization surge due to the pandemic and chips are in short supply. Our network of around 2,000 suppliers lets us manage the ramp-up.

When the Apollo 11 mission landed on the moon in 1969 it had two computers onboard. In them were microchips with around 10,000 transistors. A current iPhone has around 15 billion transistors that together add up to a gigantic amount of processing power. And it even fits in your pocket. Impressive, isn't it? We owe this progress to optical lithography, which allows the application of ever smaller structures on microchips. You might be asking yourself what this has to do with supplier management. When it comes to considering who actually made the progress possible, many initially think of the large semiconductor manufacturers. But the manufacture of extremely powerful chips is a team effort of the customers with their suppliers, who in turn have many other suppliers.

The value chain of the ZEISS Semiconductor Manufacturing Technology (SMT) segment only works thanks to a large network of domestic and international suppliers. If it wasn't for more than 2,000 partners from 35 countries, no system would leave our factory – whether lithography optics, photomask systems or process control solutions. We are supplied with special components by everyone from Asian and American global corporations to Germany family-owned companies and European start-ups. For ZEISS SMT, it is essential that we receive deliveries of the highest quality, at the agreed time and with an optimized cost structure. That's why we select our suppliers on the basis of the highest standards. It is the only way to ensure that our customers also receive top performance from us. Procurement is therefore one of the key processes contributing to our long-term success, and is essential for our competitiveness.

Global megatrends and the COVID-19 pandemic both gave digitalization another huge boost and thus also led to the current chip shortage. The increasing demand for semiconductors due to artificial intelligence, remote service, home office and home schooling, as well as long evenings on the couch watching Netflix, have led to a doubling of incoming orders for us. On the one hand it's a reason for joy, but it also needs to be managed. The increase in production is not only a challenge for us, but also for our suppliers who are also going down this road with us.

The belief in a common cause has also led us and our suppliers to the goal in extreme ultraviolet (EUV) lithography. Incidentally, the former ZEISS CEO Dr. Michael Kaschke once described this as being on par with the NASA space program in terms of complexity. It took more than 20 years before an EUV wafer scanner equipped with SMT optics was able to expose the first microchip. That's why the effort was honored with the German Future Prize by the German government in 2020. This award applies equally to the SMT supplier network, because many of our suppliers have accompanied us for many years and we have worked on technological solutions together. The technology absolutely wouldn't have become a reality without this highly motivated team. The successor technology to EUV, High-NA, is now already on the starting blocks.

Even though we have no direct competition for EUV technology yet, we have the same high level of responsibility to our customers to deliver high performance systems on time as if we had competitors. This is where our reliable supplier network, which impresses with its ability to adapt quickly and flexibly to changes while still delivering excellent quality, comes into its own. It allows us to invest in both additional manufacturing capacity and safety. A strong network allows us to solve problems quickly and master ramp-ups together so that the development of new processors and smarter end devices can continue and our competitors don't have the opportunity to enter the market.