A look at the supply chain resilience myth, as efforts to replicate the chipmaking process inside single countries or regions reveal and exacerbate bottlenecks
TAIPEI — In the sweltering Asia summertime of mid-June, Taiwan Semiconductor Manufacturing Co. urgently dispatched a team … Tweets: @genemgrossman , @kizzy224 , @pstasiatech , @chengtingfang , and @mtdtl Tweets: Gene Grossman / @genemgrossman : A good explanation of why subsidies for reshoring chip production won't work. The resilience myth: Fatal flaws in the push to secure chip supply chains - Nikkei Asia https://asia.nikkei.com/... Alice French / @kizzy224 : HIDDEN CHOKEPOINTS Bottlenecks in the chip #supplychain run as deep as the minerals needed for machinery parts. And China produces 60% of those minerals - an inconvenient truth for chip economies hoping to onshore. #CHIPSAct @NikkeiAsia Big Story: https://asia.nikkei.com/... https://twitter.com/... Paul Triolo / @pstasiatech : Yes, the “chokepoints” are.much more complex than single companies in a particular country. Mess with supply chains at your own peril... The resilience myth: Fatal flaws in the push to secure chip supply chains - Nikkei Asia https://asia.nikkei.com/... Cheng Ting-Fang / @chengtingfang : Big chip #supplychain review on why it's extremely difficult to onshore and build a complete #semiconductor ecosystem in a single country or region @NikkeiAsia exclusive & more extensive charts inside. Read here: https://asia.nikkei.com/... @mtdtl : A fascinating dive into the complexities of the chipmaking supply chain - and you learn that a COVID virus measures 100 nm. But there's a bias, no government seeks self-sufficiency, the policies aim at reducing vulnerabilities to leverage and disruptions. https://asia.nikkei.com/...
Context & Ripple Effects
The resilience push has been building for over a year: Nikkei reported as early as April 2021 that four types of chip-production equipment were in short supply, with wire-bonding machine lead times stretched to 10-12 months, while Intel pressed ahead with two $10B Arizona fabs as the marquee example of US-based manufacturing. This piece is the analytical counterpoint — Cheng Ting-Fang and colleagues argue, with economist Gene Grossman amplifying it on Twitter, that subsidies aimed at replicating the full chipmaking process inside single countries won't work because the process cannot actually be contained.
First-order effects
- TSMC's urgent mid-June dispatch of a team from Taipei shows how dependent even flagship reshoring projects are on Taiwan-based intervention — the expertise travels, not just the equipment.
- Reshoring programs like Intel's Arizona buildout now compete directly for the same scarce machinery and parts, so each new national fab deepens the very bottlenecks it was meant to escape.
Second-order effects
- China's reported ~60% share of the minerals used in chipmaking machinery parts hands Beijing leverage over every country trying to onshore fabrication — a chokepoint upstream of the ones policymakers are targeting.
- With the chip market sliding into what Bloomberg sources call an inventory correction potentially the worst downturn in a decade, subsidized capacity arriving into falling demand raises the cost of getting the resilience strategy wrong.
Third-order effects
- If Grossman's argument holds, industrial policy shifts from subsidizing duplicate fabs toward managing the true chokepoints — specialty minerals, tooling, and process know-how — where duplication is physically impossible.
- China's own rethink of its gold-rush self-reliance drive, including July's corruption probes into top semiconductor executives, suggests both Washington and Beijing are discovering that self-sufficiency targets outrun what supply chains will permit.
The trend: Governments are learning that chip supply-chain resilience cannot be legislated into single countries, pushing policy from fab duplication toward managing upstream chokepoints in materials, equipment, and expertise.