Semiconductors are essential to America鈥檚 economy and national security, powering everything from smartphones and AI infrastructure to medical devices, cars, manufacturing equipment, and defense systems. Over a period of decades, a highly interconnected global supply chain has helped chip companies in the United States steadily improve performance while lowering costs. More recently, however, new challenges have exposed vulnerabilities in global upstream supply chains supporting the U.S. chips ecosystem, underscoring the importance of taking action today to build trusted and reliable supply chains and reduce strategic dependencies. This report identifies critical materials and equipment categories used in U.S. semiconductor production, reveals supply chain vulnerabilities at risk of disruption, and outlines crucial steps needed to strengthen the American semiconductor supply chain.
KEY FINDINGS:
The process to manufacture a semiconductor can take months and requires materials, equipment, and components sourced from several layers of suppliers across the globe. While 95% of the roughly $27 billion in equipment and materials consumed by semiconductor players in the U.S. is sourced from suppliers headquartered in the United States, Europe, and Japan, the manufacturing footprint for those inputs spans the globe.
Many Tier 1 inputs used in semiconductor production rely on sub-tier raw materials and system subcomponents at high risk of supply disruptions. These vulnerabilities hidden deep in upstream supply chains compound risks to the semiconductor ecosystem in the U.S. and partner nations.
Building stronger semiconductor supply chains to support the U.S. semiconductor ecosystem will require coordinated industry-government actions, in concert with likeminded partners and allies around the world. U.S. government and industry should pursue a strategy to:
鈥� Expand domestic production and strategic inventories. While onshoring production of all materials and equipment necessary to produce semiconductors is not practical or economic, there are a number of critical inputs for which building or increasing domestic capacity is a feasible and critical near-term strategy. For others, building new U.S. capacity can take a decade or longer, followed by additional time to qualify materials for semiconductor production. Government should work closely with industry to identify and prioritize targets for onshoring and stockpiling.
鈥� Build and protect allied supply chains. The supply chains supporting the semiconductor ecosystem in the U.S. are inherently global. Retaining and reinforcing strong trade relations and investing in complementary supply chain capabilities with allied and partner supply nations will be essential for driving resilience in the U.S. semiconductor ecosystem.
鈥� Reduce dependence on unreliable sources of rare earths and critical minerals. Recent government actions to restrict the export of critical minerals and rare earth elements underscore the urgent need to bring online new mining and processing capabilities in the U.S. and partner countries. Coordinated policies, such as long-term offtake agreements, will be essential to sustain demand for new critical mineral production capacity.
鈥� Invest in research and development. The U.S. and partner governments should increase and sustain funding for research in materials science, chemistry, and engineering to develop the next generation of semiconductor materials and recycling process technologies.
