Global chip making: An industry at the cross-roads of globalization and de-coupling
About 1.4 trillion chips were produced in 2024, creating revenues for chipmakers of about USD 627 billion—according to data released by the Semiconductor Industry Association (SIA). The SIA also reported that these massive sales figures represented a 19.1% year-on-year increase, driven by very strong demand from the US (+44.8%), China (+18.3%), and other Asian nations (+12.3%).
Seeing these numbers, one cannot be surprised that we are now witnessing a global high-stakes chips race. Some people simplify that race, saying something like, “The US innovates, Asia manufactures, and China wants to do both.” Indeed, as the SIA wrote in an analysis last year, the US still leads in cutting-edge semiconductor design, and US companies still dominate with a 48% market share of chip sales. However, the actual production (“fabs”) has shifted to East Asia over the last few decades: 75% of all semiconductor production now happens in Asia, particularly by giants like @TSMC, @Samsung, and @SMIC, while only 12% remains in the US. At the same time, China—the world's biggest chip buyer—is pouring billions into building its own chip industry, with the goal of reducing reliance on foreign suppliers. The question now is whether anyone can corner this market or whether the global supply chain will stay as interconnected as the technology that it powers. To answer this question, we must first understand how the supply chain for semiconductors currently works, from the initial design to consumer purchase.
Chip design: US companies dominate, but China is catching up
Before a chip can be produced, it must be designed, which is a process that requires intense research, engineering, and highly specialized software. Nvidia, Broadcom, Qualcomm, and others are the global leaders in “fabless chip design,” in which a company designs and sells microchips but outsources the production itself to large “foundries”—the largest being TSMC (Hsinchu, Taiwan), Samsung Foundry (Seoul, Korea), and SMIC (Shanghai, China). Other companies, such as Intel, Infineon, NXP, and AMD, have been successful in both chip design and manufacturing for many years, and, more recently, Huawei from Shenzhen has also joined the chip design and production race.
Chip design itself requires both expertise and specialized software—known as EDA (electronic design automation) systems. These highly specialized software products are needed to design, simulate, and test chips and monitor production. Leading players in this field are Cadence (San Jose, CA), Synopsis (Sunnyvale, CA), and Siemens EDA (Wilsonville, OR)—all in the US.
While there is no doubt that US companies currently dominate chip design, design tools, and IP licensing for semiconductor manufacturing, Asian countries are closing the gap in design and are no longer just foundries for US-designed chips. In a Bloomberg interview earlier this week, Nvidia’s CEO Jensen Huang said that the gap between Chinese and US chipmakers is narrowing. He acknowledged that Huawei, which was barred from importing advanced chips in 2019, has become a formidable competitor, with its latest AI chip having performance similar to Nvidia’s H200 chip.
Chip production: A complex landscape with many dependencies
Raw materials: Only a few countries supply the world: For microchip production, one needs only a few raw materials, the three most important of which are silicon, germanium, and gallium. All three materials are predominantly produced in China, followed by Russia, Brazil, Canada, Finland, and the US. Major players in the microchip race, such as Korea, Japan, and the EU, have only a limited supply of the necessary raw materials, and any disruptions to the supply chain, such as in sourcing gallium from China—whether from tariffs, geopolitical tensions, or natural disasters—could have a significant impact on the industry’s ability to supply the microchips the world needs.
Production tools and facilities: The small but significant investment landscape.
According to new data from @SEMI, China is on track to outspend every other region on chipmaking equipment in 2025—even though their AI investment is actually down from last year. Globally, spending on semiconductor tools is expected to grow by 2% this year, reaching USD 110 billion and marking six consecutive years of growth. The leading companies for chip manufacturing equipment are #ASML (Netherlands), #Applied Materials (US), and #Lam Research (US).
Further down the supply chain, there’s a whole ecosystem of companies making analog chips. These components handle aspects such as power efficiency or temperature control. @Texas Instruments and @STMicroelectronics are key players in this area, so while the spotlight is often on AI and high-performance chips, the industry’s strength is dependent on its layers, from the cutting-edge down to the foundations.
But here’s the catch: Building cutting-edge chip plants has become a game for giants. We’re talking billions to develop a single facility, with years of construction and nonstop operations required to turn a profit. This sky-high barrier has left only three companies (TSMC in Taiwan, Samsung in South Korea, and @Intel in the US) capable of leading-edge production. TSMC and Samsung, in particular, act as foundries—manufacturing chips for firms worldwide—and because most advanced chips are manufactured in Taiwan, tech giants worldwide rely heavily on that market.
As ongoing tariffs reshape supply chains, China is prioritizing mature chips and its massive domestic market
China’s self-sustainability efforts
Since 2019, US chipmakers have warned that strict export controls on China would backfire, hurting their bottom line and fueling China’s rise as a competitor. However, the AI goldrush led to their revenues increasing anyway, as tech giants poured billions into AI infrastructure.
China is also investing heavily in both mature chips—older models that are essential for everything from electric vehicles to appliances—and AI innovation. The low-cost large language model @Deepseek, created by a Hangzhou startup, rivals those of OpenAI and Meta, and its revelation sparked national pride and reinvigorated the local tech market. Meanwhile, @Huawei is building a covert chipmaking network, even unveiling a 7-nanometer smartphone processor and developing new production technologies that will work without extreme ultraviolet (EUV) lithography equipment, which it has no direct access to. However, despite these undeniable successes, China is not yet self-sustaining.
Supply shifts
Even as China pushes its chip sector to operate independently of imports and foreign technology, it continues to buy record amounts of foreign equipment: Sales totaled USD 30.9 billion in 2024 alone. According to @NikkeiAsia, Japan and the Netherlands are now its top suppliers, with imports surging 28% and 31%, respectively. Singapore’s shipments to China have also increased dramatically—by 345% since 2018. Japanese lithography machines and South Korean hybrid bonding tools are in particularly high demand, especially as Chinese chipmakers like @CXMT increase their memory production; however, @ASML expects its China sales to dip due to export controls.
Yet China’s buying rush goes beyond stockpiling. The country’s chip toolmakers are thriving; @Naura Tech saw profits jump 44% in 2024, with Q1 2025 profits rising 53%, cracking the global top six. Naura Tech is the first Chinese firm to challenge in a field traditionally led by the US, Japan, and Europe.
Conclusion: The path to sustainable chip production and trade remains uncertain
The semiconductor industry and production are very complex and based on a fragile supply chain that is dominated by only a few players. The components in a semiconductor chip can travel well over 50,000 kilometers and cross more than 70 international borders before it finally reaches its end customer, according to a 2020 report by the Global Semiconductor Alliance.
The world’s industries—from consumer electronics to renewables, automotive, aerospace, and defense—remain heavily reliant on a predictable supply of capable and cost-efficient microchips. No country is currently independent of others in this multi-layered supply chain. The raw materials, the IP, and the production processes—as well as the equipment technology—all require stakeholders from around the globe to work together. While the US and China are the two dominant players due to their large economies, markets, and industry players, smaller nations—such as the Netherlands, Germany, and South Korea—still play significant roles as specialized partners in this global arms race for semiconductor leadership.
The outcome of that race remains uncertain. Looking back five years, one can see that companies locked out of certain technologies by export controls have doubled their efforts and closed the gap with global leaders. Future studies may reveal whether progress was slowed or, conversely, accelerated in such countries by creating constraints through tariffs and export bans.
For the time being, companies worldwide that rely on chips—whether produced in other parts of the world or their home countries—will need to prepare for further disruptions and uncertainties by building up stock, creating alternative supply chains, and having responses ready for various scenarios.
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(Disclaimer: The ideas, views, and opinions expressed in my LinkedIn posts, articles, videos, and profiles represent my own views and not those of my current or previous employers or any organizations with which I am associated. Additionally, all comments on my posts from respondents/commenters to my postings belong to, and only to, the responder posting the comment.)
CEO/General Manager at SNIEC- Shanghai New International Expo Centre •Board Member German Chamber of Commerce • MoB Directors UFI •MoB Directors German Centre
4mo50.000km? That does not sound very sustainable👀🤔
SVP & CFO Greater China | Infineon Technologies | Strategist | Asia Enthusiast | Bridge Builder
4moGood summary. Thanks Clas!
Managing Director Accenture Research; Head of Berlin Office Accenture
4moMatthew Haggerty
👉 Upskill your employees in SAP, Workday, Cloud, AI, DevOps, Cloud | Edtech Expert | Top 10 SAP influencer | CEO & Founder
4moClas Neumann As the geopolitical innovation race intensifies, it's truly fascinating to consider whether decoupling will break the cycle or ignite a new era of cross border innovation.