Bargaining Chip: China Could Exploit Semiconductor Shortage

The ongoing global semiconductor chip shortage has caused major disruptions in the supply chain, but it could end up having implications beyond that for the U.S. That is because we are overly reliant on foreign production of those chips, which are in such short supply. Specifically, most chips for America are produced in Asia. "Over 92 percent of advanced chips are being made in Taiwan, and the other eight percent are being made by Samsung in South Korea," says James Crean, supply chain expert and president of Texas-based CREAN Inc.

That raises the specter of China, which is trying to exert more control over Taiwan. A recent war game scenario by a Washington think tank had America's reliance on Taiwanese chips leading to direct conflict with China. Crean believes that scenario is not far-fetched. "The Chinese ambassador has been saying the biggest tinder box between China and the U.S. is the issue of Taiwan," he tells KTRH. "So this is a significant national security issue, and it points to the need for us to move manufacturing of these chips to the United States."

There is an effort underway to do just that. Samsung is building a massive chip production facility in Austin, and pending legislation in Congress would further expand microchip production in the U.S. But any results from these efforts are still a long way off. "It costs 10-20 billion dollars to build a factory, and takes a couple of years," says Crean. "So it's going to be a while before we start seeing any production of those kinds of chips moving back to the United States."

"It's both a market-driven and a national security imperative that we invest in advanced manufacturing in general, and in semiconductors specifically," he continues.

Photo: Science Photo Library RF

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