Ryan C. Berg, Henry Ziemer, and Emiliano Polo Anaya
The Coming Chip Wars
Critical minerals are behind every modern technology, from the latest developments in commercial electronics to the strategic defense equipment required for national security; leading-node semiconductors require over 300 materials, presenting multiple vulnerabilities for adversaries to manipulate their supply. Given that these minerals are indispensable for semiconductors (and the equipment to manufacture them), countries are now more attentive to the necessity of shifting away from trade models that create dependency on strategic competitors. Instead, the United States has pursued a strategy of “friend-shoring” or “ally-shoring,” shifting production to friendlier nations with shared values that are less likely to wield trade as a weapon.
China’s state-sponsored industrial policies, financing, and tax incentives have led to considerable political leverage worldwide over the raw materials required for semiconductor manufacturing; the country has positioned itself as the dominant supplier of raw material inputs for cutting-edge technology. Supply chains are fragile, especially for an industry characterized by its complexity, high-level expertise, and specialized manufacturing chains that cross international borders several times and depend on inputs from multiple private businesses and trusted suppliers. Self-sufficiency in the semiconductor industry is impractical and highly unlikely, but it is possible and desirable to diminish risks and increase resiliency. U.S. allies in the Western Hemisphere are crucial for this undertaking, and the United States should look at all segments of the value chain for the region, not just at assembly, testing, and packaging (ATP).
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