A more resilient semiconductor industry will not come from building every chip in every country. It requires knowing where the real bottlenecks are, adding alternatives at the most consequential points, and ensuring that factories can operate through disruptions—with skilled workers, reliable utilities, critical inputs, and coordinated crisis plans. Governments and companies should measure whether those steps reduce a specific vulnerability, not simply count new facilities or announce large subsidies.
Why is the semiconductor supply chain vulnerable?
Semiconductor production is a network of interdependent stages, not a single factory process. It includes chip design, wafer fabrication, assembly, testing and packaging, as well as the equipment, software, chemicals, water, energy and transport each stage depends on. A disruption in one specialized input or production step can therefore affect capacity elsewhere in the chain.
The OECD’s 2025 work on semiconductor value chains says production can involve more than 1,000 processes, and some integrated circuits may require up to 500 specialty chemicals. Those figures describe the complexity of production; they do not mean every chip uses every process or chemical.
Concentration makes certain disruptions especially consequential. The OECD reports that more than 90% of leading-edge logic chips are produced by one company, TSMC, in Chinese Taipei. It also reports that three companies control nearly 80% of chip-design software. These are different kinds of dependencies: one concerns manufacturing capacity, while the other concerns tools used to design chips. A plan that focuses only on the number of wafer fabs can miss vulnerabilities in software, packaging, materials or utilities.
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What should a resilience plan do first?
1. Map dependencies before spending
Governments and industry need a shared, regularly updated picture of where capacity and critical inputs are located, who controls them, and what can replace them. A useful map should distinguish chip categories—such as logic, memory, analog and power—and record, for each relevant stage:
- Process node, production capacity and geographic location.
- Ownership and the critical equipment, software, materials and utilities required.
- Whether a product or input has a qualified alternative, and how quickly production could switch.
- Where capacity is genuinely interchangeable and where technical or qualification limits prevent substitution.
This makes it possible to identify single points of failure instead of treating all imports, fabs or chip categories as equally risky. It also helps prevent public money from being directed toward capacity that does not relieve a material bottleneck.
2. Diversify the highest-risk bottlenecks
Use geographic and supplier diversification where concentration creates systemic exposure. Depending on the mapped dependency, that may mean additional fabrication, advanced packaging, assembly or test capacity, or alternative sources of specialty chemicals, equipment or design software. Set resilience goals by segment and risk rather than adopting blanket reshoring targets.
Each publicly supported project should identify the dependency it is meant to reduce and explain how its capacity, location and technical capabilities address that dependency. A new facility is not automatically a substitute: the relevant question is whether it can produce the needed chip or input, at the needed scale, with the required qualifications.
3. Build monitoring and a coordinated response
Maintain a current view of capacity and demand, share non-proprietary information among governments and industry, and agree in advance on warning triggers. Triggers can cover shortages, export restrictions, transport interruptions and failures of critical inputs. Governments and firms should rehearse how they would coordinate allocation, substitution and recovery when a trigger is reached.
The OECD identifies shared information, supply-chain monitoring and international collaboration as essential parts of managing disruption. Data-sharing arrangements need to make useful risk information available without requiring firms to disclose sensitive commercial details unnecessarily.
4. Fund the operating base alongside factories
Pair capital incentives for fabs with plans for the conditions that let them run: skilled workers and technicians, university and industry training partnerships, ultraclean water, dependable electricity and robust transport. These are operating requirements, not optional additions. A facility that cannot reliably access its workforce or essential utilities does not provide dependable production capacity during a disruption.
How should governments choose among resilience investments?
Compare proposals against the same criteria before committing public funds. A useful decision framework is:
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| Intervention | Dependency it can address | Questions to test before funding | Evidence of progress |
|---|---|---|---|
| New fabrication capacity | Concentrated wafer production in a chip segment where the proposed facility can make a qualified substitute. | Which products and process capabilities will it support? Are workforce, water, power and transport plans credible? How soon can usable capacity come online? | Share of funded capacity serving an identified bottleneck; qualified alternative capacity; recovery time after a disruption. |
| Advanced packaging, assembly and test capacity | Concentration or missing capacity in downstream production stages. | Does the project add a needed capability, and can it connect to the relevant fabrication and customer networks? | Availability of a qualified alternative in the targeted stage; time needed to shift production. |
| Alternative suppliers for critical inputs | Dependence on a single or highly concentrated source of chemicals, equipment or other inputs. | Can an alternative meet technical requirements? Has it been qualified, and can it supply at the required scale? | Share of critical inputs with qualified alternatives; lead times and buffer coverage. |
| Workforce and infrastructure investment | Risks that prevent planned or existing capacity from operating reliably. | Are training pipelines, utility reliability and transport capacity aligned with facility needs? | Workforce vacancies, water and energy reliability, and facility readiness. |
| Monitoring and crisis coordination | Late detection of shortages or an uncoordinated response across suppliers and governments. | Are data, warning triggers, decision roles and response exercises in place? | Time to detect and recover; readiness to coordinate substitution and allocation. |
The table is a decision framework, not a ranking: which measure is most valuable depends on the chip segment, the substitutability of its products and inputs, deployment time, total public and private cost, effects on efficiency and open markets, and the ability to monitor results or change course if demand shifts. A resilience target should be specific enough to test, but flexible enough to reflect changes in technology and demand.
What do current subsidy commitments show—and what do they not show?
The scale of public intervention is already substantial. The OECD reported in 2024 that the US CHIPS and Science Act provided USD 52.7 billion in semiconductor funding, including USD 39 billion in manufacturing incentives. It also reported that the EU Chips Act mobilised EUR 43 billion in public and private funds. These figures describe funding commitments as reported by the OECD; they are not evidence by themselves that a particular vulnerability has been removed.
Funding should therefore be assessed against outcomes, not announcements. Governments can track time to recover after a disruption, the share of critical inputs with qualified alternatives, geographic concentration, inventory and lead-time buffers, workforce vacancies, water and energy reliability, and the proportion of supported capacity that serves identified bottlenecks. Publish the assumptions behind those measures and update them as technologies, demand and risks change.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why does international coordination matter?
Semiconductor value chains span economies and firms. A country can improve its own position while leaving an upstream input or downstream production stage exposed. International information-sharing can reveal these connections and help governments align monitoring and crisis responses.
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The OECD’s Semiconductor Informal Exchange Network is one mechanism for exchanging market information. The EU Chips Act’s supply-security framework is another policy context for monitoring and supporting resilience; its second pillar is intended to attract investment and expand manufacturing, advanced packaging, test and assembly capacity for security of supply. The OECD’s 2025 mapping work also highlights supply-chain security, monitoring and transparency, secure access to critical materials, resilience-building, prioritisation based on industry needs and clearer demand signals.
Coordination should preserve open trade where it does not create unacceptable security exposure and reduce duplicative or conflicting subsidies. The OECD’s 2025 report, Economic Security in a Changing World, with its special focus on semiconductor value chains, states: “The resilience of semiconductor GVCs can be enhanced through increased diversification, particularly by establishing new manufacturing facilities.” Diversification is a means to reduce concentrated risk, not a substitute for cooperation across the wider chain.
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