Apple may unveil ever-thinner devices, and Tesla can launch as many electric models as it wants — but without microchips, none of it works.
Smartphones, electric cars, and artificial intelligence systems all rely on one essential ingredient: semiconductors, the true backbone of modern technology.
Think of semiconductors as the “flour” of the tech world — the base ingredient that makes everything else possible. Microchips, the final products, are created from semiconductors. And just like in baking, you need quality raw materials to produce a reliable end product.
Semiconductors are materials that can both conduct and block electrical current, positioned between conductors and insulators. These tiny electronic components, typically made from silicon or germanium, are vital for nearly all modern industries and are fundamental to national security and technological competitiveness.
Microchips, or integrated circuits, are the finished products that contain semiconductors — the “brains” inside our devices.
No single country dominates every step of the semiconductor value chain.
Over time, different regions have specialized in specific stages of production, creating a web of interdependence:
The United States leads in research and design.
Taiwan and South Korea are global hubs for manufacturing.
China controls most critical raw materials, including rare earth elements.
And therein lies the challenge: while the U.S. drives innovation, it still depends heavily on Asia for manufacturing — and on China for materials.
Rare earths are essential for semiconductor production. They cannot be “grown” or synthesized — they must be mined, refined, and processed.
China currently dominates this field, holding most of the world’s known reserves.
The 10 countries with the largest known rare earth reserves in 2024
Source: USGS, Statista
This concentration of resources represents one of the greatest strategic vulnerabilities for Western economies.
According to McKinsey, the global semiconductor industry is already worth over $600 billion and could surpass $1 trillion by 2030.
Yet the market is far from diverse — production and expertise are concentrated among a handful of companies and nations.
This reality concerns Washington, Beijing, and Brussels alike. The “chip shortage” of 2020–2022, triggered by the COVID-19 pandemic, exposed the fragility of global supply chains and paralyzed industries from automotive to consumer electronics.
The U.S. remains the epicenter of research and chip design.
Taiwan and South Korea dominate advanced manufacturing.
China controls essential raw materials.
This interdependence defines the modern tech economy and sets the stage for geopolitical competition.
Largest Semiconductor Companies by Market Capitalization
Source: Wealthype.ai elaboration on companiesmarketcap.com, updated September 16, 2025
In response to growing tensions with China, the United States has launched the CHIPS Act, aiming to reduce reliance on Asian production and rebuild domestic capabilities.
Recent moves include the U.S. government acquiring a 10% stake in Intel and Nvidia purchasing around 4%.
Meanwhile, China is working to build a fully self-sufficient semiconductor ecosystem, investing in every stage of the supply chain — from design to manufacturing.
The Cyberspace Administration of China (CAC) has even restricted major Chinese tech firms, such as ByteDance and Alibaba, from buying Nvidia’s AI chips — a move designed to strengthen domestic suppliers.
Europe, for its part, has begun to assert itself through ASML, a Dutch company that leads the world in extreme ultraviolet (EUV) lithography — the technology required to produce the most advanced chips.
However, the continent still faces the challenge of closing its infrastructure and skills gap with the U.S. and Asia.
The semiconductor industry offers a perfect analogy for smart investing:
Specialization can drive progress, but diversification ensures resilience.
Just as the chip supply chain spans continents and companies, investors should diversify across both sectors and geographies.
Every region — whether the U.S., China, or Europe — brings unique strengths and weaknesses.
Even political leaders recognize this. Washington continues to seek access to rare earth deposits outside China — including in places like Greenland — as part of a broader strategy to reduce dependence.
As Goldman Sachs Vice Chairman Robert Kaplan once said, the world is not deglobalizing — it is becoming more global, but with new centers of power emerging.
The semiconductor industry exemplifies this shift: interconnected, competitive, and crucial to the world’s economic and technological future.
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