The Global Supply Chain

Geography of chip-making, geopolitics, and government interventions

Geographic Concentration

The semiconductor supply chain is remarkably concentrated geographically, creating both efficiency and vulnerability:

Design: U.S. (Silicon Valley, Austin), Israel, UK — where the engineering talent concentrates
Leading-edge fabrication: Taiwan (TSMC), South Korea (Samsung) — 80%+ of advanced logic chips
Memory fabrication: South Korea (Samsung, SK Hynix), Japan (Kioxia/Western Digital)
Equipment: U.S. (Applied Materials, Lam, KLA), Netherlands (ASML), Japan (TEL, Advantest)
Materials: Japan (photoresists, gases), Germany (wafers — Siltronic), U.S. (specialty chemicals)
Assembly & test: China, Malaysia, Philippines, Vietnam — lower-cost regions

Key Concept: Single Points of Failure

A natural disaster in Taiwan, an earthquake in Japan, or export restrictions from the Netherlands could disrupt the entire global electronics supply chain. This concentration risk drives government policies like the CHIPS Act.

Government Interventions

Semiconductors have become a national security priority worldwide. Major government actions include:

U.S. CHIPS and Science Act (2022): $52B in subsidies for domestic fab construction, plus restrictions on selling advanced chips and equipment to China.
EU Chips Act (2023): €43B target to double EU's global share from 10% to 20% by 2030.
China's "Big Fund": Multiple rounds totaling $100B+ to build domestic capability, accelerated by U.S. export controls.
Japan: Subsidies for TSMC fab in Kumamoto and new Rapidus initiative for 2nm chips.
India: $10B+ incentive program to attract fab investment (Tata partnership with PSMC).

The result is a massive global buildout of new fabs — the largest semiconductor investment wave in history.

Key Companies

Semiconductor Economics

Knowledge Check

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What percentage of advanced logic chips are fabricated in Taiwan and South Korea combined?

80%+50%30%95%+