The world's semiconductor manufacturing is dominated by northeast Asia.

Global semiconductor manufacturing landscape

The world's semiconductor manufacturing is dominated by northeast Asia. Due to the relatively low tech, capital-intensive semiconductor supply chain activities such as packaging and testing, China dominated the global semiconductor market, followed by Taiwan and Malaysia.

The United States leads the world in semiconductor production in the most knowledge-intensive areas. Half of the top 20 chip design companies ranked by revenue are headquartered in the United States in 2019; four of the top five semiconductor EDA companies with core intellectual property are headquartered in the United States ranked by revenue.

While China and the United States are leaders in packaging, testing, and chip design, their rankings for wafer manufacturing fall behind Taiwan and South Korea, who play a crucial role in overcoming the bottleneck of semiconductor material production. According to data, Taiwan's TSMC and South Korea's Samsung hold a monopoly on global innovation capacity for researching 7 nm and 5 nm chips, with Taiwan accounting for 92% and South Korea for 8%. This dominance in the market makes the global supply vulnerable to potential challenges such as natural disasters, issues with education infrastructure, or geopolitical conflicts due to reliance on these two countries.

Taiwan is currently encountering mounting difficulties in ensuring adequate electricity and water resources. According to recent accounts, the entire island endured a significant blackout in March 2022. In addition to these infrastructure troubles, the local semiconductor sector has expressed worries about talent drain in recent times. As one professional in Taiwan expressed, "The insufficiency of semiconductor engineers here is exacerbated by the retirement of older generations and the younger generation gravitating towards higher-paying prospects in China, where there is also a dearth of such professionals." Despite attempts by the Chinese government to restrict immigration into their nation, this trend persists.

As a result of the COVID-19 pandemic, a global chip shortage can be avoided if China and the United States prioritize onshore semiconductor manufacturing capabilities. Uncontrollable factors, such as natural disasters, international political crises, and wars, pose threats to the semiconductor supply chain, and both countries are preparing their own plans to deal with them.

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