WIREDGOV

EXPERT COMMENT

Supply shortages of semiconductors highlight security risks of an interconnected world and complex global supply chains. Circular economy approaches can help.

Semiconductor shortages have become a critical technological vulnerability and a potential national security threat for major economies including the United States, China, and Europe, as all countries and many industries rely on Taiwan for cutting-edge semiconductor devices.

The ongoing supply chain shortage of chips is also becoming a chokepoint for the clean energy transition around the world. But circular economy solutions could help reduce systemic risks and address these multiple challenges.

The current crisis of global microchip shortages that started in 2020 during the COVID-19 pandemic are expected to continue well into 2022 and beyond. Furthermore, there are new long-term supply chain risks on the horizon stemming from US-China geopolitical dynamics and resulting trade decisions.

The shortages have raised attention not only about the processes and challenges of making microchips, but also about the geopolitical concentration of manufacturing by a few companies. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract manufacturer for semiconductors, constitutes nearly 90 per cent of the market for advanced microchips in 2020. The obstacles in ensuring stable supplies and manufacturing semiconductors are possibly going to get even harder, more expensive, more technical, and potentially also more political. 

Click here to continue reading the full version of this Expert Comment on the Chatham House website.