Software Developers Beware of IT Risks from Semiconductors

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By Travelers
2 minutes
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The world of software development thrives on pushing boundaries, constantly evolving to leverage the latest semiconductor capabilities into increasingly powerful software. However, the semiconductor manufacturing ecosystem is vulnerable to risks threatening to disrupt it. The explosive growth in demand for AI-ready semiconductors pressures the supply chain that hardware manufacturers depend on. This, in turn, can impact software businesses.

"To help mitigate semiconductor risks, software and IT company risk managers need to prepare for the threats of semiconductor supply chain disruptions and cyberattacks targeting semiconductor hardware," said Jennifer Klein, Software and IT Lead at Travelers Technology & Life Sciences.

Bottlenecked software research & development

Reliance on specific hardware or dependencies on manufacturers for cutting-edge testing can leave software companies vulnerable to unexpected semiconductor supply chain disruptions and delays.

Imagine a software company is crafting the next generation of image recognition software, but the powerful graphic processing units they need to test it are not available because of a sudden disruption in the supply of a special semiconductor. Development grinds to a halt, innovation stalls and the business’s competitive edge starts to fade. That’s the nightmare scenario of bottlenecked research and development, according to Klein.

“Sophisticated software is important, but without hardware such as the latest semiconductors, you may not be able to deliver on schedule, creating increased risk to your company,” she said.


Diversify and fortify your supply chain. Secure alternative hardware sources and build strong contingency plans into your delivery schedules.


Consider Technology E&O insurance coverage to protect your company from legal liabilities arising from delivery problems. Missing chips can spell disaster for crucial software deliveries. When hardware delays derail software development projects, contractual obligations may fall by the wayside, potentially leading to technology errors and omissions (E&O) claims.

“Late delivery may be a contract failure leaving software developers facing legal and financial consequences,” said Klein.

Hidden cybersecurity vulnerabilities in hardware

With intricate applications running on complex hardware and semiconductors, software can be vulnerable to cybersecurity threats hidden in the silicon semiconductor chip itself. The increased complexity in the hardware can introduce new attack vectors creating new access points for cyber harm. Likewise, lack of precision in the coordination of the hardware and software can create security gaps.


Prioritize supply chain transparency and understand your semiconductor and hardware providers’ physical security practices. Proactively conduct software audits, change default access credentials on hardware, stay vigilant for updates and ensure timely implementation.


Consider CyberRisk Tech insurance from Travelers with enterprise-wide Technology Errors and Omissions Liability coverage for additional protection.

Diversifying hardware options, building strong supplier relationships and adopting strong cybersecurity practices are all vital steps in strengthening your software development pipeline and shielding your business from semiconductor risks.

“Navigating risks from unexpected sources like semiconductors requires proactive measures. Don’t let the shadow of semiconductor risk dim your software development future,” said Klein.

Learn more about software and IT insurance from Travelers or reach out to a Travelers representative.

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