The strategic importance of semiconductors — which are essential both for existing digital technologies and for enabling innovation — make shifting trade rules and rising political risks particularly costly. For example, the US and its allies have sought to constrain China’s semiconductor industry, using export controls to limit its access to advanced chips and equipment.
In recent years, the combination of rising geopolitical tensions and the embrace of industrial policies has increasingly disrupted long-established production networks. Now, Trump’s tariff war is taking this process to the next level, posing an existential threat to global value chains. Nowhere is this more apparent than in the semiconductor sector.
The semiconductor value chain is unusually complex and geographically fragmented. It begins with raw materials and specialty chemicals, then continues to capital equipment and chip design, moves on to wafer fabrication, before finishing with assembly, testing, and packaging. Each stage of production is characterised by different levels of capital intensity, technological sophistication, and strategic vulnerability, with some segments of the value chain — notably chip design — involving considerable amounts of proprietary technology.
