Despite efforts involving billions of dollars in investments, chip manufacturing remains a global game with a multi-layered supply chain spanning numerous countries
Semiconductors, or microchips, play a key role in the operation of a vast range of devices, from microwaves to military weapons. The semiconductor industry is valued at over $580 billion, yet this figure doesn’t fully capture their impact on the global economy. To boost domestic production, President Biden signed the CHIPS and Science Act, allocating $50 billion in funding.
The Global Journey of a Chip
According to the New York Times, even with U.S. manufacturing facilities fully operational, chip production remains inherently global. The process of creating a chip by U.S.-based semiconductor company Onsemi—used to power electric vehicles—illustrates the unavoidable reliance on East Asia and other regions.
The production of silicon carbide chips begins at a factory in New Hampshire, using raw materials like silicon and carbon sourced from Norway, Germany, Taiwan, and chemicals from the U.S., Germany, and Japan. Silicon carbide crystals are then sent to the Czech Republic for slicing with machinery from the U.S., Germany, Italy, and Japan.
Next, the wafers go to South Korea, where they undergo processing using technology from the Netherlands, the U.S., and Japan to create channels only a few atoms wide. Once processed, they are cut into small chiplets and sent to China, Malaysia, and Vietnam for final assembly and testing. Finally, the completed chips are shipped to automakers such as Hyundai and BMW, as well as parts suppliers in Canada, China, and the U.S.
Although the first computer chips were invented in the U.S., parts of the supply chain began moving overseas by the late 1960s to reduce costs. Consequently, the U.S. share of chip manufacturing has dropped from 37% in 1990 to just 12%.
Challenges for the U.S.
Unlike oil, which is a highly uniform product, semiconductors come in many types with diverse values, requiring a complex supply chain that spans multiple countries. This makes it difficult to produce all semiconductor components solely within the United States.
Despite efforts to reclaim market share and restore the domestic supply chain, the U.S. faces significant challenges in building the necessary infrastructure. Many other countries are also heavily investing in the chip industry, making it difficult for U.S. investments to fully reshape the global landscape.
According to research by Boston Consulting Group and the Semiconductor Industry Association, the $50 billion investment could raise the U.S. share of chip production to 13-14% by 2030 but won’t be enough to secure a dominant position. The study also notes that without this funding, the U.S. share could drop to just 10%.
Supply chain and workforce challenges remain substantial obstacles. This situation underscores the need for international cooperation to secure a stable semiconductor supply—a factor seen as central to global geopolitics for decades to come.
