How Nations Can Achieve Realistic Semiconductor Self-Sufficiency

Political leaders want regional chip independence. But is complete independence achievable—or even desirable—given the industry’s inherent interdependence? 

The global semiconductor industry has become the new focal point for technological competition, with major powers investing massive sums to reduce dependencies and secure their positions in this nearly $630 billion market. Yet the extreme specialization and geographic concentration of the semiconductor supply chain—spanning chip IP, design tools, specialized materials, manufacturing equipment, chip design, fabrication, testing, and talent—makes complete self-sufficiency economically impractical and strategically questionable. 

After decades building an intricate global production network optimized for cost and innovation, the industry now faces pressure to splinter into regional blocks. Politicians pressure companies to chase chip independence at any cost. But this shift raises important questions: Can any nation truly achieve chip self-sufficiency? And would disconnecting from the global ecosystem ultimately hurt competitiveness more than help security? 

Understanding the Semiconductor Ecosystem: A Highly Specialized Global Value Chain

For decades, the semiconductor industry perfected a magic trick: making incredibly complex products cheaper every year. They did it through extreme specialization. Each company focused on one tiny slice of the supply chain and became world-class at it. One firm in the Netherlands made the machines that etch circuits. A handful of companies in Taiwan turned those circuits into actual chips. Someone else in Malaysia tested them. This hyper-efficient system gave us smartphones, smart cars, and the entire digital economy at prices that kept dropping. 

But here’s what nobody talked about: we built a house of cards. The entire global economy now depends on a supply chain so specialized that losing even one supplier can shut down entire industries. 

The COVID pandemic exposed what industry insiders had warned about for years: the chip supply chain works brilliantly… until it doesn’t. When it fails, it fails spectacularly. While consumers noticed empty car lots and PlayStation shortages, behind the scenes companies scrambled to secure wafers, substrates, and testing capacity. A single missing component—often from a sole supplier in one region—halted entire production lines. The chip shortage rippled through every industry that needs semiconductors, but automakers got hit worst. Modern cars need hundreds of chips to run everything from engines to entertainment systems. When chip supplies dried up, car factories shut down worldwide: The automotive industry alone lost $210 billion in 2021, and some manufacturers still haven’t fully recovered. 

This 2021-2022 chip shortage wasn’t just a pandemic problem. Growing geopolitical tensions turned a supply crisis into a strategic nightmare, forcing countries to rethink their entire approach to semiconductors. 

The Semiconductor Supply Chain: How Extreme Specialization Created Dangerous Dependencies

To understand why chips are so hard to make independently, you need to understand just how specialized each part of the supply chain has become. Over decades, the industry naturally split into separate segments, each controlled by a handful of companies in specific regions. This specialization wasn’t planned—it happened because making money in this industry rewarded narrow expertise over trying to do everything. 

Today, the global semiconductor supply chain includes several specialized sectors, each with unique challenges and opportunities. These include: 

• Electronic Design Automation (EDA): Three US companies dominate this sector: Synopsys (~32%), Cadence Design Systems (~30%), and Siemens EDA (~13%). These tools are essential for chip design but require extraordinary expertise to develop, creating high barriers to entry. 
• Semiconductor Materials: China mines most of the world’s rare earth elements, which Japan then turns into the ultra-pure silicon wafers and chemicals that semiconductors require—materials so clean that contamination is measured in parts per trillion. This $67.5 billion market runs on a simple reality: raw materials from one country, processing expertise from another. 
• Manufacturing Equipment and Foundry Services: ASML’s market-leading position in advanced lithography technologies and TSMC’s dominance in advanced foundry services create critical chokepoints in the supply chain. 

Geographic Concentration Creates Systemic Vulnerabilities

The global semiconductor industry has carved itself into specialized kingdoms. The United States dominates chip design (IP, EDA) and certain equipment categories, representing about 50% of global revenue. Taiwan controls roughly 62% of advanced foundry capacity—so much that semiconductors represent one-sixth of its total GDP. Europe’s strength lies in ASML’s advanced lithography technologies, the machines everyone needs but only one company makes. 

China plays an interesting double role too: it’s both the largest semiconductor consumer at 50% of the global market and an important producer, holding 31% of total global foundry capacity in 2023—projected to reach 39% by 2027. This combination makes China both indispensable and threatening to the established order. 

That threat triggered a change in semiconductor trade. The U.S. and allies have slapped tighter limits on high-end chip tech going to China. These rules have flipped trade patterns upside down and sped up China’s push to make its own tech, while making multinationals deal with complex compliance requirements. 

The latest export controls (as of publication) specifically target China’s access to advanced manufacturing equipment, EDA tools needed for 14nm nodes and below, and devices made with U.S. equipment or intellectual property. For tech executives, this means dealing with a constantly changing regulatory environment where yesterday’s approved shipment might violate tomorrow’s rules. Companies like ASML may lose over €2 billion in Chinese sales per annum, while Applied Materials reported $400 million in reduced revenue due to restrictions. Simultaneously, these firms are seeing demand from other regions trying to build local capacity. 

Reshoring Progress and Persistent Vulnerabilities

This geographic fragmentation has direct business impacts as well. TSMC has only recently begun producing advanced 4-nanometer chips at its Arizona facility, with Commerce Secretary Gina Raimondo announcing in January 2025 that “For the first time ever in our country’s history, we are making leading edge four-nanometer chips on American soil.” Full high-volume production isn’t expected until the end of the first half of 2025. This initial production is an important first step in U.S. policy to onshore advanced chip manufacturing. For American tech companies and defense contractors, this means gradual progress toward domestic access to manufacturing previously available only in Taiwan. 

However, this progress represents just a fraction of what true resilience requires. The broader concentration pattern still makes the semiconductor ecosystem brittle. A disruption in any specialized region—whether through natural disaster, geopolitical tension, or pandemic—can trigger global market chaos. Because manufacturing spans dozens of countries, even targeted trade restrictions or localized problems can cascade into widespread shortages and price volatility. 

Geopolitical Tensions Drive Massive Global Investments

Concerns about supply chain security and technological sovereignty have triggered major government interventions worldwide. The United States committed $52.7 billion through the CHIPS Act plus additional tax credits. While President Trump initially called for eliminating the program in March 2025, he instead signed an executive order on March 31, 2025, creating the “United States Investment Accelerator” within the Commerce Department to take over CHIPS Act implementation. The new entity will focus on “negotiating much better CHIPS Act deals than the previous administration” and reducing regulatory burdens for semiconductor investments, according to the White House. TSMC also announced a new $100 billion investment to build five additional chip facilities in the US. 

The quest for chip self-sufficiency has become a trillion-dollar global casino, with countries placing enormous bets on facilities that may not pay off for years. Semiconductor fabs that break ground today face long construction timelines followed by lengthy qualification processes before producing a single viable chip. By then, the competitive landscape may look completely different. Yet governments still pour money in, fearing national security risks more than economic inefficiency. 

These investments aren’t limited to the United States. Nations across the globe are racing to establish or strengthen their semiconductor capabilities: 

India has entered the semiconductor competition with its $10 billion Semiconductor Mission and secured major investment from Micron Technology, which is constructing a $2.75 billion assembly and test facility. Japan has intensified its semiconductor strategy by establishing Rapidus Corporation with a government support package that is estimated to reach $11.46 billion aimed at revitalizing its domestic chip industry and securing a position in advanced 2-nanometer technology. 

Meanwhile, other regions continue their own initiatives: the European Union has established a €43 billion Chips Act through 2030, China launched its third “Big Fund” phase in May 2024 with $47.5 billion, and South Korea has developed a $450 billion K-Semiconductor strategy through 2030. 

These initiatives are changing the semiconductor industry on a global scale, with projected $2.3 trillion in new wafer fabrication investment between 2024-2032, compared to $720 billion in the previous decade. However, complete self-sufficiency would require approximately $1 trillion in additional global investment and result in 35-65% semiconductor price increases due to suboptimal scale and inefficiencies. 

The investment blitz continues despite growing evidence that full semiconductor sovereignty remains financially prohibitive for any country. Funding announcements grab headlines, but industry veterans know these facilities require more than money—they need specific talent, existing supplier networks, and decades of accumulated manufacturing knowledge.  

Regional Capabilities and Strategic Approaches to Self-Sufficiency

Each major semiconductor region is trying its own way to become more self-sufficient, building on what they’re already good at while fixing their weak spots. These different paths reflect each nation’s priorities, resources, and political situation. 

The regional semiconductor contest pits countries with vastly different starting positions against each other. Some know how to make chips but can’t design them. Others can create great chip designs but must send them overseas for manufacturing. No country has mastered the entire process from sand to finished systems. These uneven skills drive both teamwork and fighting, as countries race to fix their weaknesses while keeping their advantages. 

United States: Rebuilding Manufacturing While Protecting Design Leadership

The US is strong in chip intellectual property (77% of North American market), IDM sales (47% globally), and fabless companies (68% global market share). But the US is weak in foundry capacity (only 6% of global share) and materials dependencies. This creates a situation where the US creates many of the world’s best chip designs but depends heavily on foreign countries to actually make them. 

Main problems include the enormous costs ($20-30 billion per advanced fab), worker shortages (67,000 worker gap expected by 2030), and higher operating costs compared to Asia. 

Mainland China: Trying to Build Everything While Under Export Controls

China does well in outsourced semiconductor assembly and testing (OSAT) with 26.3% global market share and mature node foundry services. China is weak in advanced EDA tools (11.48% domestic market share), advanced lithography equipment, and advanced node manufacturing. These problems have gotten worse as export controls tighten, forcing China to try to develop its own versions of everything. 

Despite these limitations, SMIC has managed to make 7nm chips using DUV lithography despite export controls. The domestic equipment industry has reached 13.6% self-sufficiency rate in 2024. Main problems include more export controls coming, technical hurdles without EUV access, and needing to develop a completely separate technology stack. 

Taiwan: Keeping Manufacturing Leadership While Building Factories Elsewhere

Taiwan is exceptionally good at foundry services (61-70% global market share) and OSAT (48% global market share). Taiwan is weak in EDA tools, wafer fab equipment, and specialized materials. These technical problems are now complicated by political tensions, forcing Taiwanese companies to build factories in other countries. 

Taiwan has created a “Chip-based Industrial Innovation Program” with NT$300 billion funding and a “N-1 Policy” restricting export of its most advanced process technology. Main problems include geopolitical risk, talent poaching with Chinese firms offering up to 3x salary premiums, and cyber-attacks with 2.4 million daily intrusion attempts in 2024. 

Japan and South Korea: Using Their Strengths While Fixing Weaknesses

Japan is very good at materials (56% global market share) and equipment (32% global market share). South Korea dominates in memory chips (70.5% DRAM market share, 52.6% NAND) with Samsung having 7.5% global foundry share. Both countries struggle with EDA tools and expanding beyond their traditional products. 

Japan has set aside $7 billion for next-generation chip research. Samsung has promised $230 billion over 20 years for a semiconductor mega-cluster in South Korea. Both countries face problems including huge capital needs and tricky political positioning between the US and China. 

Europe: Building on Equipment Strengths While Expanding Manufacturing

Europe is good at making chip equipment (with ASML’s leading position in advanced lithography technologies) and specialized chips for cars and factories. Europe is weak in advanced logic manufacturing and design tools. The region depends on Taiwan for advanced logic and the US for design tools. 

Intel has committed $33 billion for facilities in Germany, while a TSMC joint venture represents more than a $11 billion investment in Dresden. Europe faces problems including different plans across EU member states, higher energy costs, and not enough venture capital for semiconductor startups. 

The Three Main Problems of Chip Independence

The trillion-dollar semiconductor independence dream is a mirage. Our analysis shows that the extraordinary specialization, massive costs, and deeply intertwined nature of chip supply chains make complete self-sufficiency an economic fantasy and a strategic dead-end. No single country—not even the U.S. or China—can realistically achieve total semiconductor independence without crippling cost increases and worse, falling behind technologically. Politicians might accept higher costs for “national security,” but they won’t tolerate outdated technology. Defense systems, in particular, require the most advanced semiconductors available. 

Thus, companies must prepare for a world of “strategic self-sufficiency”—where countries and regions focus on what they’re good at while fixing their biggest weaknesses. For executives, this means planning for a future with multiple regional semiconductor hubs, each with different strengths and weaknesses. Success will require balancing the efficiency of global supply chains against the security of local production. 

With true independence impossible, the real question isn’t “how do we build everything ourselves?” but “how do we handle unavoidable interdependence while fixing our biggest weaknesses?” This view should focus on three main problems: 

1. Talent Challenges: Not Enough People with the Right Skills

The semiconductor industry can’t find enough skilled workers. By 2030, companies will need 1 million more skilled workers than they can hire. 

Different regions face different versions of this problem: 

• United States: Will be short 67,000 workers by 2030, with one-third of employees 55 or older 
• Taiwan: Losing engineers to mainland China, which offers much higher salaries 
• Europe: Needs 10,000-15,000 more skilled workers to achieve its Chips Act goals 
• China: Graduates tons of engineering students but lacks experienced chip designers 

2. Technical Challenges: Complexity Makes Everything Harder

The chip industry faces major technical problems beyond just manufacturing: 

• Verification failures: First-time silicon success rates have dropped to just 14%, mostly because chips are now so complex and companies don’t spend enough time testing before manufacturing 
• Legacy node importance: Everyone talks about cutting-edge chips, but 40% of semiconductor demand remains at older process nodes (≥ 28nm), creating two completely different supply chains 
• Standard-setting battles: Technical standards are splintering as China creates its own specifications through its China Standards 2035 initiative 
   

3. Resource problems: Money, water, energy and materials

Semiconductor manufacturing needs large amounts of resources: 

• Money: Semiconductor plants cost $10 billion each with 3-5 year construction timeframes 
• Water: One advanced factory uses up to 15 million litres of ultra-pure water daily, creating problems in dry areas 
• Energy: Semiconductor factories eat massive amounts of electricity, with typical advanced factories needing up to 100 megawatt-hours of power per hour 
• Rare earths: Getting reliable rare earth supplies means finding alternatives to China’s 60-70% market control 

Executive Leadership: Why Chip Independence Plans Often Fail

Investors can build factories, but only the right executives can make them work. While governments pour billions into chip manufacturing, they often miss a basic problem: finding leaders who know both semiconductor operations and new markets. 

Top semiconductor executives are incredibly scarce. Running a chip operation means understanding ultra-precise manufacturing while handling supply chains, government permits, and local regulations. A successful fab executive must know about nanometer-scale production issues and big-picture policy problems. 

This executive shortage hits harder because most experienced chip leaders work in a few established regions: Taiwan, South Korea, Japan, and Silicon Valley, for example. These executives have built entire careers within established industry clusters. Moving to a new region means leaving behind professional networks built over decades, uprooting families from communities, and risking career dead-ends if the new venture fails. Few are willing to take these personal and professional risks, regardless of the salary offered. 

The consequences appear in nearly every attempt to create new semiconductor hubs. Seemingly straightforward projects face unexpected delays when regulatory approvals take three times longer than planned because executives lack relationships with local officials. Manufacturing lines achieve half the expected output because subtle process adjustments—second nature to veterans working with familiar teams—take months to identify and implement. Equipment worth hundreds of millions requires specific operational know-how that can’t be transferred through manuals or brief training sessions. 

The root cause? Every country wants semiconductor independence, but they’re all fishing from the same tiny pool of talent. TSMC alone employs most of the world’s advanced node experts. Samsung and SK Hynix have cornered memory manufacturing knowledge. ASML’s engineers are the only ones who truly understand EUV lithography. You can’t clone these people, and you can’t train replacements in less than a decade. 

But while governments keep announcing grand semiconductor plans, a handful of companies have quietly solved the talent equation. They’ve stopped waiting for immigration miracles or universities to pump out semiconductor PhDs. Instead, they’re using seven strategies that actually deliver the executives and engineers they need: 

1. Build where the talent already lives: Stop trying to relocate engineers from Asia to Arizona. Put design centers in Hsinchu. Build test facilities in Penang. Open R&D in Bangalore. Go to the talent instead of expecting it to come to you. 
2. Create shadow boards with retired executives: Former heads of leading fabs, memory divisions, and process technology groups might not want to run another fab, but they’ll often advise if the price is right. Pay consulting rates that make their retirement interesting. 
3. Tap networks you don’t have: Your HR team doesn’t know which lithography engineers are ready to leave or which memory division executives are frustrated. Specialized search firms spend decades building these relationships. They know who’s moveable before those people update their LinkedIn. 
4. Map your succession three layers deep: Your star fab director is 58 and has two years left. Their deputy only knows 45nm processes. The real talent is probably buried in middle management at a competitor. Start building your bench now—the best semiconductor executives get locked into succession plans years before they’re promoted. If you’re not already talking to them, someone else is. 
5. Conduct real technical due diligence on executives hires: That VP candidate claims they achieved 95% yield on advanced nodes? Your typical reference check won’t verify that. You need evaluators who know which metrics matter, what questions expose gaps, and how to separate actual achievements from team accomplishments. Technical competence in semiconductors can’t be faked past people who understand the job. 
6. Audit your board’s semiconductor IQ: Most boards approving billion-dollar fab investments have zero semiconductor experience. They’re software people, finance people, retired politicians. You need directors who’ve actually built fabs, who know why yield rates matter, who can spot unrealistic projections in technical presentations. The same firms that find your executives can usually assess whether your board knows enough to govern them. 
7. Bridge critical gaps with interim leadership: Your new fab won’t produce for 18 months, but you need expertise now. Experienced semiconductor executives often take interim roles between permanent positions. They’ll set up your processes, train your teams, and establish vendor relationships. By the time your permanent executive arrives, the foundation is already solid. 

Full independence remains a fantasy. The winners will be those who build the most resilient networks and manage interdependence best. Stop chasing the impossible and start building what works. 

About the Authors

Jan-Bart Smits is a Managing Partner at Stanton Chase Amsterdam. He began his career in executive search in 1990. At Stanton Chase, he has held several leadership roles, including Chair of the Board, Global Sector Leader for Technology, and Global Sector Leader for Professional Services. He currently serves as Stanton Chase’s Global Subsector Leader for the Semiconductor industry. He holds an M.Sc. in Astrophysics from Leiden University in the Netherlands. 

David Harap is a Managing Director at Stanton Chase Austin, bringing over 25 years of executive search experience to his role. He has successfully placed hundreds of senior executives and functional leaders across various industries. A Cornell University graduate and Father Kelly Scholar, David lectures at the University of Texas at Austin. He is a certified Ambassador for Hofstede Insights, bringing unique insights on organizational culture to his work.