Playing politics: The semiconductor supply chain

How should nations be looking to strengthen their semiconductor assets instead? And what’s the purpose of barbed speeches, over-aggressive competition, and international tariffs in a market that seems to depend upon cooperation?

By Mark Lippett, CEO, XMOS.

It should be clear that no country – and even no continent – can be entirely self-sufficient. This is impossible.”

Thus spoke Ursula von der Leyen, President of the European Commission, when announcing the EU’s adoption of the European Chips Act in February 2022. The President was referring to the semiconductor supply chain: a complex concatenation of technologies and processes, from raw materials and extending all the way to fully produced chips with integrated IPs.

With each dependent upon others in the chain, and so many semiconductor niches to fill, placing meaningful investment in the supply chain is a huge challenge. Whereas manufacturers could once pour resources into producing chips for large, predictable, and pre-defined markets, like digital cameras, there are now so many diverse applications for chips that ‘general’ production is no longer realistic.

Consequentially, nations can’t simply throw money at the problem. Between the speed at which technology is advancing, the multi-year cycle required to produce semiconductors, and the shifting sands of trade restrictions and tariffs, total self-sufficiency on a national level is undeniably impossible.

So: why is this the case? How should nations be looking to strengthen their semiconductor assets instead? And what’s the purpose of barbed speeches, over-aggressive competition, and international tariffs in a market that seems to depend upon cooperation?