One Industry, Two Systems — Semiconductor Supply Chains Are Splitting
The semiconductor industry has long been the poster child of globalization—an intricate dance of design in California, manufacturing in Taiwan, packaging in Malaysia, and integration in China. But this choreography is changing.
Driven by geopolitical rifts, national security concerns, and industrial policy shifts, the world is witnessing the rise of a dual-track chip trade: one aligned with the U.S. and its allies, and the other centered around China’s increasingly self-sufficient ecosystem.
What’s Happening?
🔹 U.S.-led Track:
Export controls on advanced chips and EUV tools
The CHIPS Act: $52B+ for domestic fab development (Intel, TSMC Arizona)
Friendly fabs in Japan, Germany, and India
Focus on leading-edge nodes and defense-grade semiconductors
🔹 China-led Track:
Massive investment via the National IC Fund
Focus on mature nodes (28nm+), automotive chips, and telecom
Domestic champions like SMIC and YMTC scaling production
Open-source alternatives to ARM and x86 architectures (e.g., RISC-V)
Case Study: ASML and the Equipment Squeeze
Dutch lithography giant ASML has been restricted from selling its most advanced EUV machines to China. In response:
China is accelerating domestic lithography innovation (Shanghai Micro Electronics Equipment)
Secondary markets are emerging for used DUV tools, with workarounds through Malaysia and Singapore
This bottleneck underscores how equipment—not talent—is now the most strategic chip asset.
Global Industry Impact
The dual-track system is:
Forcing tech multinationals to split their supply chains (e.g., “one China, one rest-of-world” product lines)
Driving up redundancy costs, especially in R&D and fabrication
Leading to regional clusters (Silicon Valley 2.0 in Texas, Beijing IC Valley, Dresden’s microelectronics hub)
Key Takeaway
The global chip industry is no longer a single circuit—it’s two parallel systems, partially interoperable but politically fragile. Companies navigating this terrain must rethink not just supply chain logistics, but industrial allegiances.