TEHRAN, July 13 — The global semiconductor industry, valued at over $500 billion in 2022, sits at the centre of a geopolitical contest that carries echoes of earlier technology races in the Middle East and Asia. For nations that have long relied on imported chips for everything from civilian electronics to military systems, the concentration of advanced manufacturing in a single geography has become a matter of strategic vulnerability. According to the Semiconductor Industry Association, the United States produced 37% of the world’s chips in 1990.
By 2022, that share had fallen to about 12%. This decline unfolded even though the integrated circuit was invented on American soil — by Jack Kilby at Texas Instruments in 1958, and the planar process by Robert Noyce at Fairchild Semiconductor in 1959.
The Taiwan factor and the geography of advanced production
The shift in manufacturing geography has been dramatic. Taiwan Semiconductor Manufacturing Company, or TSMC, founded in 1987 by Morris Chang, now produces over 90% of the world’s most advanced chips — those with linewidths of 7 nanometers or less. South Korea’s Samsung Electronics is the second-largest foundry, holding about 17% of global foundry revenue in 2022.
For observers of regional power dynamics, this concentration carries clear implications. Advanced chips are critical for artificial intelligence, 5G communications, and defence systems.
Any disruption to supply from Taiwan would ripple through global supply chains with consequences far beyond the commercial sector. The global chip shortage of 2020-2023 demonstrated the scale of that vulnerability. Triggered by pandemic demand surges and supply chain disruptions, the shortage caused an estimated $500 billion in lost revenue for automakers and other industries, according to industry accounts.
Washington’s response: the CHIPS Act and new fabs
The US Congress passed the CHIPS and Science Act in July 2022, allocating $52.7 billion in subsidies and tax credits to boost domestic semiconductor manufacturing. The US Department of Commerce, led by Secretary Gina Raimondo, now oversees the program. Several major projects have been announced.
TSMC is investing $40 billion in two advanced fabrication plants in Arizona, a commitment made between 2020 and 2022. Samsung announced a $17 billion plant in Taylor, Texas, in 2021.
Intel, the American chip giant, announced a $20 billion expansion in Ohio in 2022. These represent the largest public-private efforts to rebuild domestic chip production capacity in decades. Officials said the goal is to reduce dependence on a single source for the most advanced chips.
China’s position: largest consumer, constrained producer
China is the largest chip consumer, accounting for about 60% of global demand. But its domestic industry remains less advanced. Semiconductor Manufacturing International Corporation, or SMIC, founded in 2000, can produce chips down to 14 nanometers — a generation behind the 7-nanometer and smaller linewidths that define cutting-edge production.
In October 2022, the United States imposed export controls that restrict sales of advanced chipmaking equipment to China. These measures, according to state and international reports, aim to slow Beijing’s ability to close the technological gap.
China relies heavily on imports to meet its chip demand. The tension between its consumption and its production capacity remains a central feature of the technology competition between the two powers. The race for chip supremacy, officials said, now involves national security concerns as much as commercial competition.
Advanced chips are the foundation for artificial intelligence systems, 5G networks, and modern defence platforms. The question of who manufactures them — and where — has become a defining issue of the current era.
What to watch next is whether the new US fabrication plants come online on schedule, and whether export controls succeed in maintaining the technology gap that currently separates the leading producers from China’s domestic industry.
Sources
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