Global Semiconductor Supply Chain Spans Multiple Countries, Creates Strategic Tensions

Silicon, the basic material of semiconductor chips, is one of the most abundant elements on Earth. Sand is largely silicon dioxide. Yet the path from raw sand to a functioning microprocessor passes through one of the most geographically dispersed and technically demanding supply chains in the history of manufacturing, touching dozens of countries and requiring materials and processes that are, in some cases, controlled by a single company or produced in a single facility.

The stages of semiconductor production

Making a chip begins with purifying silicon to extraordinary levels of purity, then growing it into cylindrical ingots that are sliced into thin wafers. These wafers travel to fabrication plants, where hundreds of process steps using photolithography, deposition, and etching build up layers of microscopic circuits. After fabrication, chips are tested and then packaged, a process in which they are embedded in protective casings and connected to external contacts. Each of these stages can happen in a different country.

The materials required are themselves a global supply chain. The ultrapure gases used in fabrication, the photoresists that define circuit patterns, the chemical-mechanical polishing slurries that planarize each layer, and the specialised metals used in interconnects all come from specialist suppliers concentrated in Japan, South Korea, Germany, and the United States. Disrupting any one of these input streams can halt production downstream.

The equipment concentration problem

The most significant single-point concentration in the chip supply chain is not a material but a machine: extreme ultraviolet lithography equipment, known as EUV, used to print the finest circuit features on leading-edge chips. This equipment is manufactured by a single Dutch company, ASML, drawing on components from suppliers across Europe, the United States, and Japan. A single EUV machine contains hundreds of thousands of parts, costs hundreds of millions of dollars, and takes years to produce. The global stock of these machines is small, and every leading-edge chip fabricator in the world depends on them.

This concentration means export controls on EUV equipment are highly effective as a trade policy tool: withholding access to this single category of machine effectively prevents a country from independently manufacturing the world's most advanced chips, regardless of how much it invests in other aspects of the supply chain.

Why the chain became so dispersed

The geographic dispersal of semiconductor production was not planned; it emerged from decades of companies seeking cost advantages, technical expertise, and favourable policy environments in different locations. Taiwan became a dominant fabrication hub, South Korea a leader in memory chips, Japan a specialist in materials and equipment, and the United States the centre of chip design. This specialisation produced extraordinary efficiency and drove down chip costs, enabling the digital economy. The same specialisation created the interdependencies that now concern policymakers.

What it means for Australia

Australia sits outside the core semiconductor supply chain as a producer but inside it as a consumer of every product the chain enables. The nation also holds geological resources relevant to the sector: high-purity quartz for crucibles used in silicon production, and a range of critical minerals used in chip packaging and advanced packaging substrates. As governments in the United States, Europe, and Asia invest in reshoring chip production, Australia's role as a supplier of raw materials to those new fabs is a potential economic opportunity.

The bottom line

The semiconductor supply chain is a marvel of global specialisation that became a geopolitical liability when relations between the major participating countries deteriorated. Rebuilding resilience into it requires not just capital and policy, but time, because the expertise embedded in specialised suppliers and fabs took decades to accumulate.