Chip Shortage Reshoring Paradox
The 2020-2023 chip shortage exposed dangerous concentration — TSMC in Taiwan produces 90% of advanced semiconductors. Governments responded with reshoring initiatives: the US CHIPS Act ($52B), EU Chips Act (€43B), Japan and South Korea with similar programs. The goal is supply chain security through domestic manufacturing. But semiconductor fabs take 3-5 years to build and cost $10-20B each. The talent pool for advanced chip manufacturing is concentrated in East Asia. Reshored fabs produce chips at 30-50% higher cost than Asian equivalents. And by the time new fabs come online, the shortage that motivated them has passed and the technology node has advanced. The reshoring investment addresses yesterday's crisis at tomorrow's prices, while the fundamental concentration in TSMC's most advanced nodes remains unchanged.
What people believe
“Domestic chip manufacturing ensures supply chain security.”
| Metric | Before | After | Delta |
|---|---|---|---|
| Domestic chip production capacity | 12% of global (US) | Target 20% by 2030 | +8% |
| Cost per chip (domestic vs Asia) | Asian baseline | +30-50% domestic premium | +40% |
| Time to new fab capacity | N/A | 3-5 years per fab | Slow |
| TSMC advanced node concentration | 90% | Still 80%+ even with reshoring | Minimal change |
Don't If
- •Your reshoring plan assumes domestic fabs will be cost-competitive without permanent subsidies
- •You're building trailing-edge fabs when the supply chain risk is in leading-edge nodes
If You Must
- 1.Focus reshoring on leading-edge nodes where concentration risk is highest
- 2.Invest in workforce development alongside fab construction
- 3.Plan for ongoing subsidies — domestic fabs won't be cost-competitive for decades
- 4.Diversify across allies (US, Japan, EU) rather than full self-sufficiency
Alternatives
- Allied-shoring — Diversify across trusted allies rather than full domestic production
- Strategic reserves — Stockpile critical chips rather than building domestic fabs
- Design diversification — Design chips that can be manufactured at multiple foundries
This analysis is wrong if:
- Reshored semiconductor fabs achieve cost parity with Asian fabs within 10 years without ongoing subsidies
- Domestic chip manufacturing capacity comes online fast enough to address the next supply chain disruption
- Reshoring reduces TSMC's share of advanced node production below 50%
- 1.US CHIPS and Science Act
$52B federal investment in domestic semiconductor manufacturing and research
- 2.TSMC Arizona Fab Delays
TSMC's US fab delayed multiple times due to workforce and construction challenges
- 3.Boston Consulting Group: Semiconductor Supply Chain Analysis
Analysis showing domestic production costs 30-50% higher than Asian equivalents
- 4.Semiconductor Industry Association: State of the Industry
Data on global semiconductor manufacturing concentration and reshoring progress
This is a mirror — it shows what's already true.
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