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International chip provide chain more and more susceptible to huge disruption, research finds By Reuters


© Reuters. FILE PHOTO: People take photos on the drought-stricken riverbed of the Touqian River in Hsinchu, Taiwan

By Stephen Nellis

(Reuters) – A new study by a US industry group found that the global semiconductor supply chain is becoming increasingly vulnerable to natural disasters and geopolitical disruptions as suppliers have become more focused on specific regions.

The report is based on a global chip shortage that began with overbooked factories in Taiwan late last year but has since been aggravated by a fire at a plant in Japan, a frost that turned off electricity in Texas, and a worsening drought Taiwan this year. The shortage has shut down some production lines at automobile factories in the United States, Europe, and Asia.

Modern chip manufacturing involves more than a thousand steps and requires complex intellectual property, tools, and chemicals from around the world. The Semiconductor Industry Association, which represents most of the U.S. chipmakers, announced Thursday that it has found more than 50 places in the supply chain where a single region has a market share of more than 65%.

For example, intellectual property and software for the development of state-of-the-art chips are dominated by the US, while special gases, which are crucial for the manufacture of chips, come from Europe. The most advanced chips are made entirely in Asia – 92% of them in Taiwan.

If Taiwan couldn’t make chips for a year, it would cost the global electronics industry nearly half a trillion dollars in sales. The report stated, “The global electronics supply chain would come to a standstill.”

However, the study cautioned that a standalone approach in which governments attempt to replicate the supply chain domestically is not feasible as it would cost $ 1.2 trillion worldwide – with up to $ 450 billion in the US alone – Dollars of that cost would cause the price of chips to skyrocket.

In some cases, however, incentives have been requested to create a “minimum viable capacity” in regions where there is no part of the supply chain.

In the case of the US and Europe, this would mean new advanced chip factories to offset the concentration in Taiwan and South Korea.

“We don’t have enough semiconductor manufacturing in the US … and that needs to be fixed with support from the US government,” said John Neuffer, chairman of the association, to Reuters.

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