Electronic Products & Technology

How BLOCKCHAIN stands to impact the supply chain

By Michela Menting, research director at ABI Research   

Automation / Robotics Electronics Supply Chain blockchain blockchain

Blockchain will be able to offer some significant advantages within the electronics manufacturing and supply chain environment

At its core, blockchain is a public ledger technology that uses distributed consensus and cryptography to provide an authoritative record of secure transactions. The technology is disruptive in that it eliminates centralization, which uses a trusted third party. As such, blockchain threatens to disrupt the centralized architecture that underlies the brunt of many transactions today. This new trustless trust model can provide a number of advantages, including transparency and automation, facilitating processes in many applications.

Within the electronics manufacturing and supply chain environment, blockchain will be able to offer some significant advantages. Business logic can be programmed through smart contracts, and contractual agreements can be automatically executed peer to peer or machine to machine. Smart contracts can therefore be programmed to do many things: tie-in identities, release funds, communicate information, record and embed data, track and monitor goods, delivery secure services; all this in a pre-programmed, self-executing, autonomous manner.

With contract manufacturing on the rise and new players in tech fields targeting the industry, the logistics are becoming more complex. This more crowded supply chain means that there is less visibility end-to-end and increasing issues with accountability and auditing. Participants can only see so far, either up or down stream. And there is of course the continuing issue with IP theft, the counterfeiting and cloning of products, especially in electronics, that is increasingly common in contract manufacturing and all along the supply chain.


Blockchain provides visibility end-to-end to all parties

As a transparent ledger, blockchain can provide visibility end-to-end to all parties involved in that supply chain, from a product design perspective (silicon IP), all the way through to its final form and delivery post-market (IoT device). As the various participants in a supply chain engage with the product, their actions are logged and recorded. When certain conditions are met, smart contracts can allow access to the designs to the right contract manufacturer, provision the device with the authorized service provider, authenticate the legitimate buyer, etc. There is a clear audit trail and traceability of the device.

The ability to provide transparent information on identity and ownership, with smart contracts that can trigger authorization, authentication and access control is highly beneficial for electronics OEMs to provide for secure manufacturing and lifecycle device management.

Digital product memory could be tied into the hardware of the device, in a secure element for example, such as smartcard, trusted platform module, hardware security module or other secure hardware. Smart contracts could then leverage connectivity to facilitate secure provisioning, onboarding and management, enabling trusted post market services OTA such as patching, updating and versioning, etc.

The blockchain would provide an open (to relevant parties), secure and immutable ledger from which electronics OEMs could more effectively optimize and streamline processes and maybe even add new value to operations. But most importantly, integrating with the blockchain through secure hardware could make it more difficult for counterfeiting and IP theft.

“For OEMs, a big question will be around cost – what is it going to cost to implement and deploy, what is it going to replace that has already been paid for”

Despite the potential advantages, blockchain is still a nascent technology. They key here is trustless trust and breaking down barriers that have formed around centralized systems. But blockchain probably won’t stick in areas that are controlled end-to-end by one entity or where there is already trust in the process. Blockchain for the sake of blockchain is not a good business model.

For OEMs, a big question will be around cost – what is it going to cost to implement and deploy, what is it going to replace that has already been paid for, and what kind of resources are needed to keep it running. Most importantly, will blockchain address the ongoing issues in the electronics manufacturing space, and in particular around IP theft and cloning.

The thing about blockchain is that it doesn’t need substantial investment or change to integrate it, at least within the electronics industry. The infrastructure for lifecycle device management is already largely in place, through the expanding IoT ecosystem. The blockchain can simply provide better visibility into the infrastructure, and more strictly define authorization and access control policies to legitimate users. And it can also potentially aid in tracking down the threat vectors in the supply chain where cloning and IP theft tend to occur most often.

Lifecycle device management

There are also scale and energy consumption issues with the blockchain. With the decreasing cost of cloud storage, this is less of an issue, but it is important to consider that there may well be hundreds of participant nodes, each with a copy of the ledger that can only grow in size over time, and may have real-time requirements as well (immediate synchronized replication across all nodes may not be possible with devices that may only connect infrequently). How fast can this be done? Will all nodes have the bandwidth? Will all devices be required to a full copy of the ledger on the hardware? Lifecycle device management is a growing market opportunity for IoT devices, but many of those will be resource constrained. How will those devices fare with a growing ledger and increasing number of smart contracts that they may need to host?

And of course, as a nascent technology, there are a lot of unknowns – smart contracts and decentralized autonomous organizations have been hacked in the past. There are a lot of fraudulent ICOs currently ongoing and even where they are legitimate, they exist in a grey regulatory area. How will blockchain affect data retention / deletion regulation?  And what about data protection and privacy laws. There is often a good reason data isn’t shared among all participants. Maybe this is where the cryptography features of the block can provide some security, but to what extent?

All of these questions will have to be addressed. Beyond that, there could still be resistance to adoption. It can take one country like the U.S. or China to block it, and the market might not take off. Despite this, blockchain has certainly come a long way since the 2008 whitepaper. Currently, the market is in the middle of a first movers phase for blockchain 2.0 – with a lot of ongoing pilots, PoCs and beta testing. Most likely, commercialization will take place in 3-5 years for the industrial manufacturing and the supply chain industry. But there is a lot of opportunity in the electronics space that could answer many current unresolved issues. OEMs will need to be able to positively ascertain that blockchain can solve their supply chain issues around transparency and IP theft before diving in headfirst.


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