The Semiconductor Supply Chain

I want to commend to your attention what I think is a very good article by Akhil Thadani and Gregory C. Allen at the Center for Strategic and International Studies which they describe as a “map” of the semiconductor supply chain. Here’s their conclusion:

As it stands, technological and economic limitations have evolved a semiconductor supply chain that is incredibly complex and specialized. Despite consistent efforts, no government has been able to achieve true self-sufficiency in semiconductor manufacturing to date. To successfully fortify the United States’ position along the supply chain and mitigate risk, U.S. policy should aim to grow a healthy and resilient semiconductor ecosystem in which allies and partners continue to play a key role. The Department of Commerce has already stated that this is a key prong of the CHIPS Act implementation strategy. Carried out by the CHIPS office in the Department of Commerce, coordinating investment and incentive programs, promoting knowledge exchanges and collaboration, and facilitating cross-border commerce are all high-priority objectives for CHIPS Act implementation.[44] Continued dialogue with key allies, particularly in the Indo-Pacific, is important to minimize duplicative investments, grow the comparative strengths of each country’s domestic industry, and de-risk key dependencies.

In my view it would be prudent for the U. S. to rely a lot more on Canada and Mexico and a lot less on Taiwan, Japan, and South Korea.

6 comments… add one
  • bob sykes Link

    Buried in the CHIPS Act are all sorts of environmental and social justice requirements that will divert resources from the manufacturing plants themselves and increase operating costs:

    The feds give with one hand and take away with the other. These are the kinds of government actions that make Taiwan the chip-making king it is.

    Do you remember the scandal when it was discovered that the then new F-15 needed Japanese chips to fly?

  • TastyBits Link

    I do not have a problem with including treaty allies, but Turkey is an ally and a problem. Non-treaty neighbors are better than client states, but they are still problematic.

    The US does have standard issue armaments from NATO countries. I am not sure about the production arrangements, but if that country is overrun by the ten-foot tall Russians, I hope that the US has the option to produce them.

    Currently, Mexico is in a narco-war between the various cartels and the government. The Central and South American allies are better, but like Turkey, they are problematic.

    U.S. Collective Defense Arrangements – If they ain’t on the list, they ain’t an ally, period.

  • steve Link

    AFAICT neither Canada nor Mexico currently plays much of a role in the chip pipeline or production. You would have to build an industry largely from scratch it looks like. Those companies would be competing against other international companies who have been in business for a while. Tough row to hoe. We would need to be willing to pay more and go through growing pains.


  • We’ve been stupid for the last 40 years if that’s what you mean.

    Canada has substantial supplies of cobalt and some of the largest rare earth deposits in the world. The chip assembly and testing plant in Bromont, Quebec is the largest in North America.

    Mexico has substantial deposits of lithium and rare earths.

  • CuriousOnlooker Link

    Semiconductor production uses minimal amounts of lithium or rare earths (compared to say battery production or EV’s).

    What semiconductor production requires is prestigious amounts of capital (a state of the art fab costs > $17 billion USD); a business environment that allows projects to run on time (when there are new generations of manufacturing every 24 months, a 6 month delay to a project can be the different billions of operating projects vs losses); and certain type of human capital (engineers to operate and do R&D).

  • Keep in mind that we’re talking about nearshoring the entire semiconductor supply chain.

    Taiwan started its semiconductor industry from scratch a little less than 50 years ago; South Korea just about 60 years ago.

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