Don’t start by picking a replacement country. Start by identifying which components could stop your operations, tracing where they are really made and sourced, and qualifying practical alternatives before a disruption. A resilient plan usually combines supplier diversification with targeted inventory, contingency planning and, where justified, selective investment in additional production capacity. Moving everything home is neither necessary nor a guarantee of resilience.
Why a second supplier may not mean a second source
A technology company can appear to have several suppliers while still depending on one country or upstream producer. Different vendors may buy the same component, rely on the same sub-tier manufacturer, or ship through the same vulnerable route. A disruption at that shared point can affect all of them.
Map the production stages and dependencies behind critical components, not only the names and addresses of your direct suppliers. Include upstream materials and parts, manufacturing locations, warehouses, inventory and transportation routes. Ask suppliers where their own critical inputs come from and where production can take place. The OECD recommends timely, extensive supply-chain information because hidden concentration can make a seemingly diversified supplier list misleading.
The scale of the issue is not limited to individual firms: the OECD’s 2025 review reports that 50% more products were sourced from a limited range of suppliers in the early 2020s than in the late 1990s. That is a global trend, not a measure of any one company’s exposure.
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How to diversify a technology supply chain away from a single country
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Choose the inputs that matter most
Begin with components whose loss could halt production, interrupt a critical service or create a serious financial or operational impact. Concentration alone is not enough to set priority: a highly concentrated input may be easy to replace, while a less concentrated one may have a long recovery time or no qualified substitute.
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Map the real dependency chain
For each priority input, record direct suppliers, production locations and stages, upstream dependencies, inventory, warehouses and transport routes. Note whether nominally separate suppliers share a country, facility, sub-tier supplier or route. Capture the information with enough detail to update it when suppliers or production arrangements change.
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Rank exposure by impact and recovery time
Estimate what happens if each source stops: the effect on operations or revenue, how long recovery might take, whether a technically suitable substitute exists and how long that substitute would take to qualify. Prioritize components where the impact is high, recovery is slow and alternatives are limited.
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Qualify alternatives before they are needed
Identify potential suppliers and production locations, then assess technical fit, regulatory requirements, capacity and realistic lead times. A supplier is not a usable backup until it can provide the required product at the necessary scale and has passed the relevant qualification process. Share appropriate forecasts and risk information with suppliers and customers; cooperation can help partners identify constraints earlier.
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Choose a mix of mitigations
For each component, compare supplier diversification, a second production location, targeted inventory, near-shoring and selective domestic capacity. Use more than one measure where the consequences justify it. A substitute supplier may be simpler to qualify than relocating an entire industry, while inventory can provide time to respond if a disruption is temporary.
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Exercise a disruption scenario
Simulate the loss of a supplier, country or transport route. Check whether teams know which products and customers are affected, how much usable inventory is available, who can authorize a switch and what information must be shared. Record gaps, assign owners and set deadlines for corrective actions. The UK government’s National Semiconductor Strategy includes cross-government and industry crisis and contingency planning as part of resilience work.
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Refresh the map and assumptions
Review supplier concentration, production locations, capacity, trade conditions and the status of alternate sources periodically and when a material change occurs. A backup that was viable last year may no longer have available capacity or may depend on the same upstream source as the primary supplier.
How to compare sourcing and resilience options
Assess options component by component. A country label is not evidence of a viable alternative: check actual production capability, upstream dependencies and time to recover. Use the following factors to compare candidate suppliers and locations.
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- Impact and recovery: What operations would stop if supply failed, and how long would it take to restore supply?
- Substitutability: Can another source meet technical and regulatory requirements, and what qualification work is needed?
- Cost: Compare total landed cost, including logistics, qualification and the cost of carrying additional inventory.
- Routes and lead times: How long does transport take, and do primary and alternate routes share a disruption risk?
- Operating conditions: Does the location have the necessary workforce, utilities and infrastructure?
- Other exposures: Consider regulatory, geopolitical and cyber risks for both the supplier and the location.
| Option | What it can do | Main limitation to assess |
|---|---|---|
| Additional qualified supplier | Creates another source without requiring the whole industry or production system to move. | May involve qualification work, higher prices or investment; verify that the supplier does not share the same upstream dependency. |
| Near-shoring | Can shorten long transport routes and reduce some delay exposure. | Proximity alone does not remove shared upstream, geopolitical or infrastructure risks. |
| Targeted inventory | Can buy time while a disruption is resolved or another source is brought online. | Has carrying costs and cannot replace every specialized input. |
| Domestic capacity or reshoring | Can add local capacity for selected critical needs where the capability is feasible and strategically important. | Can require substantial investment and does not automatically create a complete or resilient supply chain. |
These options are not interchangeable. Standard products with simpler technology may be easier to source from multiple suppliers than highly customized, technology-intensive products with strong scale economies. Set the acceptable concentration and backup approach for each component according to its operational importance and available alternatives.
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Why semiconductor supply chains need a specific plan
Semiconductors are difficult to diversify quickly because production is specialized and divided across interconnected economies. The OECD’s 2025 analysis says no country performs every stage of the value chain or produces every semiconductor type used by downstream industries. Building capacity depends on capital, skilled workers, ultraclean water, reliable energy and transport infrastructure.
The OECD reports that one company, TSMC in Chinese Taipei, produces more than 90% of leading-edge logic chips. This figure applies to leading-edge logic chips, not to all semiconductors. For context on their importance to ICT and electronics, the OECD’s 2025 review compares semiconductors’ 8% share of final-demand value added with 2% for primary energy, using underlying 2018 data.
For chip-dependent products, identify the specific chip type and production stages at risk, ask suppliers about qualified alternatives and realistic capacity, and plan for the time needed to validate a substitute. A broad promise to source chips domestically is not a substitute for confirming that the required type, scale and supporting infrastructure are available.
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Domestic production can be one part of a portfolio, but a national border does not eliminate supplier concentration, transport problems, shared upstream dependencies or other disruption risks. Broad relocalisation can also be costly. In its 2025 modelling, the OECD found that relocalisation scenarios could reduce global trade by more than 18% and global real GDP by more than 5%; resilience did not consistently improve, and GDP volatility rose in more than half of the economies modelled. These are scenario results, not forecasts for an individual company.
The more useful question is whether a specific investment improves the recovery options for a specific input enough to justify its cost. In many cases, a qualified second source, a manageable inventory buffer or a contingency arrangement may address the exposure more directly than relocating production.
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