Semiconductor Supply Chain Battles Continue as Countries Decouple Chip Dependency

The Geopolitics of Semiconductor Supply Chains

Semiconductors are at the heart of modern technology, powering everything from smartphones and AI to military systems and industrial machines. Their manufacture and delivery are essential to global economic stability and national security, making semiconductor supply chains a hotly contested geopolitical arena. Countries worldwide are increasingly seeking semiconductor self-sufficiency to decrease vulnerabilities and gain a strategic advantage in the technology race.

Key Players: US, China, Taiwan, EU, and South Asia

The United States has long been a pioneer in semiconductor innovation, with companies such as Intel, NVIDIA, and Qualcomm pushing technical advances. However, it relies heavily on the sophisticated fabrication of chips from Taiwan’s TSMC and South Korea’s Samsung. To lessen dependency, the United States has introduced the CHIPS and Science Act, which aims to boost local manufacturing and enhance national security.

China has actively invested in semiconductor self-sufficiency under the Made in China 2025 project. Companies such as SMIC (Semiconductor Manufacturing International Corporation) have made strides, but China remains behind in cutting-edge manufacturing of chips due to US export prohibitions on sophisticated chip-making equipment.

Taiwan’s TSMC (Taiwan Semiconductor Manufacturing Company) controls the worldwide chip supply, manufacturing more than half of all semiconductors and 90% of sophisticated chips. This positions Taiwan as a strategic focal point in the US-China tech war, with geopolitical tensions producing concerns about supply chain stability.

The European Union has enacted the European Chips Act to develop its semiconductor sector and lessen dependency on Asian supply networks. Key firms like ASML (which manufactures crucial lithography equipment) help Europe play a strategic role in global semiconductor production.

Economic and Security Risks

The COVID-19 pandemic highlighted flaws in worldwide semiconductor supply networks, leading to shortages in areas such as autos and consumer electronics. The incident emphasized the need for increased supply chain resilience and diversity to avoid repeat disruptions.

Sanctions on Chinese semiconductor businesses have increased, limiting access to crucial technologies. This has prompted China to intensify its attempts to attain semiconductor self-sufficiency, while the United States continues to tighten export prohibitions to hinder China’s technical gains.

Future Trends

The global deployment of AI, IoT, and 5G technology will drive increased demand for innovative semiconductors. These technologies necessitate increasingly advanced devices, increasing rivalry for semiconductor leadership.

Western nations want to minimize their reliance on Chinese IT supply chains through decoupling efforts. This trend, sometimes known as “tech decoupling,” is causing a restructure of global semiconductor supply networks, with new hubs forming in India, Vietnam, and other regions of South Asia.