GUANGZHOU, China — If you talk about chipmaking, two companies usually spring to mind — Taiwan’s TSMC and South Korea’s Samsung Electronics. The two Asian firms combined control more than 70% of the semiconductor manufacturing market.
The U.S., which was once a leader, lags behind in this space after monumental shifts in the business models in the semiconductor industry.
But a global semiconductor shortage and geopolitical tensions with China have bolstered Washington’s scrutiny of the supply chain, which is concentrated in the hands of a small number of players, and has created a drive to bring manufacturing back to American soil to regain leadership.
The U.S. has earmarked billions of dollars and is reportedly looking at alliances with other nations.
Semiconductors are critical to everything from cars to the smartphones we use. And they have also been thrust into the center of U.S.-China tensions.
“One characteristic of US policy is that it has heavy emphasis on China. This has now become a national imperative to enhance self-sufficiency in semis production, accelerated by the recent chip shortages and the ‘tech war’ against China,” Bank of America said in a note published Wednesday.
How Asia came to dominate manufacturing
The key to understanding the geopolitics of semiconductors, which countries dominate and why the U.S. is trying to boost its domestic industry, lies in coming to grips with the supply chain and business models.
Companies like Intel are integrated device manufacturers (IDMs), which design and manufacture their own chips.
Then there are the fabless semiconductor firms, which design chips but outsource manufacturing to so-called foundries. The two biggest foundries are TSMC in Taiwan and Samsung Electronics in South Korea.
Over the last 15 years or so, companies began shifting to this fabless model. TSMC and Samsung took advantage as they began to invest heavily in leading-edge manufacturing technology. Now if a company like Apple wants to get the latest chip for their iPhone produced, they have to turn to TSMC to do it.
TSMC has 55% foundry market share and Samsung has 18%, according to data from Trendforce. Taiwan and South Korea collectively have 81% of