Blockchain and the Electronic Components Industry in 2018

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Blockchain technology, an open ledger system popularized by the ever-famous Bitcoin, is proving beneficial to forward-thinking supply chain industries. Blockchains allow for a transparent, incorruptible record of transactions between retailers and consumers in nearly every phase of manufacturing. Early implementation has already begun in the electronic components industry, with more and more companies adopting blockchain technology into their businesses.

Blockchain technology, the underlying ledger system for Bitcoin transactions and other cryptocurrencies, is being discussed as an option to optimize and secure the electronic components supply chain. This technology, regularly touted as the “future of the internet” could potentially revolutionize businesses and redefine companies and economies.

Based upon complex cryptography, the blockchain effectively provides a permanent, incorruptible, and irreversible record. Additionally, it is transparent to all users and not hosted by any single party. Each time a user transacts within the supply chain, they effectively add a record (or block) to the blockchain. Every change to the system is traced back to the user who entered it into the system, making everyone accountable.

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Critically important, however, is any information submitted is not overridden, deleted, or tweaked—It is set in virtual stone. Blockchain leaves no room for fraud of any kind throughout the supply chain, thus solving the trust problem when two parties exchange value. Companies like Walmart, Maersk, British Airways and FedEx have begun adopting blockchain technologies within their supply chains to manage everything from cargo data to saving time and money on restocking processes.

The current electronic components industry supply-chain infrastructure has created an opportunistic gap that feeds the growth of counterfeit components. As semiconductors reach into more applications, the threats posed by counterfeit components have become increasingly serious. Industry suppliers may unknowingly use sub-standard counterfeits risking financial losses and damage to brand image.

Blockchain technology thus can be used to track and verify each step along the life cycle of products, including the origin of their raw materials, the steps in the manufacturing process, and delivery dates to warehouses and consumers’ homes. The blockchain system can also be invaluable in decreasing manufacturing delays, ensuring products meet regulations, and preventing counterfeit versions from being sold. As the product moves through the supply chain, each transaction would be noted and time-stamped, forming a record that can be tracked with anonymity.

Blockchain technology has a lot of exciting potential, but there are some serious considerations that need to be addressed before we can say it’s the technology of the future. Issues such as the huge escalation in power demanded from a large blockchain network have some raising concerns about climate change, the availability of power in developing countries, and reliability of power in developed nations.

Other issues include the speed and effectiveness with which blockchain networks can execute peer-to-peer transactions come at a high aggregate cost, which is greater for some types of blockchain than others. Finally, most of the public is still oblivious to the existence and potential uses of this technology. For blockchain technology to make the move to the mainstream, there must first be a public buy-in to its benefits.

Though the technology is revolutionizing many different industries, the known benefits of distributed ledger technology are mostly limited to specialists within the field and those whose industries are currently adopting blockchain solutions. With its massive potential of offering both retailers and consumers a more transparent marketplace and an accessible, tamper-proof system, blockchain technology is bound to make significant strides in the years to come.