Information for completing this Term Project can be found within $($but is not limited to$)$

your eText: $$FITT$.(2021).$ Global Value Chain $(7\mathrm{.}2$ ed$.).$ FITT$.$ Students are expected to

augment their knowledge of the relevant issues in this Term Project by researching online

resource material as necessary and where applicable. You may also consult the

references at the end of this Project assignment $($recommended$).$ Contact your professor

if you have any questions on this section.

Marking Scheme:

See page $9.$ Contact your professor if you have any questions on this section.

Project Description:

By $2020$ increased demand for semiconductor chips in consumer electronics resulted in

a chip shortage for many other manufacturing industries $($Straughan$,2023).$ Many North

American automobile manufacturers viewed this shortage as a significant risk since most

semiconductor chips are produced in Asia $($Semiconductor Manufacturing by Country

$2023,$ n$.$d$.).$

Many countries have announced subsidies to encourage domestic production of

semiconductor chips. For example, the United States government $$passed the CHIPS

Act, which includes $$52$ billion in government subsidies for research and production of

semiconductors in the US$,$ and similar initiatives were announced in the EU$,$ South

Korea, and Japan $($Scott$,$ n$.$d$.).$

Meanwhile, federal and provincial government subsidies in Canada have already

encouraged General Motors, Honda, Ford, Stellantis and Toyota to establish or expand

manufacturing operations here. And recent subsidy announcements related to electric

vehicles and battery production could further stimulate automobile production in Ontario

$($Mai$,2023).$ Ontario is a popular choice for automobile manufacturers for many reasons.

Regarding logistics$,$ the province is in the middle of the country. It has an excellent

network of highways, railways, airports and ports, and land border access with four US

states. Ontario has the country$$s largest population and a skilled workforce for the

automobile industry $($Canadian Provinces by Population $2023,$ n$.$d$.).$

Version $1\mathrm{.}04$

What the province does not have, however, is semiconductor chip manufacturers. This is

problematic for automobile manufacturers since modern cars incorporate about $100$

distinct electronic modules. These modules collectively include as many as $1,400$

individual semiconductor chips that control various electronic systems and account for as

much as $40\%$ of an automobile$$s cost $($Buchanan$,2022)($See Appendix A$).$

Shortages in semiconductor chips can be traced to the origins of the COVID$-19$

pandemic. As more people began working from home, demand for cars declined while

demand for smartphones, computers and other electronic devices increased. The

semiconductor industry quickly pivoted to meet this new demand and could not resupply

the automotive sector when market demand returned in $2020-2021.$ Adequate production

capacity may be available by $2025,$ but the risk of another pandemic or shortages due to

geopolitical tensions are real possibilities $($McKinsey & Company, May $2023).$

You have identified a business opportunity in this environment and started a company to

provide semiconductor chips for automobile manufacturers in southwestern Ontario.

Recognizing that automobile OEMs will purchase semiconductor chips in large volumes

directly from the chip manufacturers, your business plan involves holding inventory of

several varieties of $$infotainment$$ chips. Infotainment chips are located in the driver$$s

cockpit area of a car. They are required for the digital display $($e$.$g$.,$ calculation and visual

display of speed, mileage, fuel level, etc.$)$ and audio$/$visual connectivity of navigation

systems $($e$.$g$.,$ verbal commands and directional map displays$)($See Appendix A$).$

Your company, Ancaster Automotive Supply, is located in Ancaster, west of Hamilton,

Ontario $($See Appendix B$).$ You source, import, and warehouse inventory of infotainment

semiconductor chips from this location. When automobile OEMs in southwestern Ontario

cannot obtain the applicable infotainment chips from overseas suppliers, they can order

them from Ancaster Automotive Supply on a JIT delivery basis.

An$-$Kee Electronics Corporation

During your online research for a supplier of semiconductor chips, you contacted An$-$Kee

Electronics Corporation, located in the Qidu $($chee$-$doo$)$ District of Keelung City, a port

city near Taipei, in northern Taiwan $($See Appendix C$).$ Your initial inquiry drew a response

from Hana Chen, International Sales Manager for An$-$Kee Electronics. She told you An$-$

Kee had been in business for ten years, and most of its sales were to automotive

manufacturers in China. So far, she has been unable to develop business in North

America because other Taiwanese companies like TSMC and ASE Technologies have

already dominated the global chip market.

In follow$-$up discussions, it seemed clear that the potential existed for your two companies

to work together. Your