Is there an undercurrent of decentralization of U.S. semiconductors? Latest report reveals 'shocking truth'

The United States has been working for many years to strengthen its domestic semiconductor industry and reduce its dependence on China's supply chain. However, a new research report shows that if we only look at the sources from which U.S. chip manufacturers directly purchase equipment and materials, we may underestimate China's influence in the global semiconductor supply chain. The South China Morning Post quoted the Semiconductor Industry Association (SIA) as saying that China directly supplies about 5% of equipment and materials to the U.S. chip industry based on manufacturing country, but China controls more than 90% of certain rare earths needed for chip manufacturing. However, the dependence of some key raw materials of the U.S. semiconductor industry on China is much higher than the level shown by direct supplier data, and some are even as high as 95%. According to the latest report released by the Semiconductor Industry Association (SIA), U.S. chip manufacturers purchase nearly US$27 billion (approximately NT$858.6 billion) in equipment and materials every year, 95% of which goes to suppliers headquartered in the United States, Europe and Japan. However, if the calculation is based on the actual production location, this proportion drops to 68%, indicating that the supplier's headquarters location may not reflect the true source of production. The report shows that if calculated based on the location of the supplier's headquarters, China's share of direct procurement of semiconductor equipment and materials in the United States is only about 1%, but based on the actual production location, it increases to 5%; Southeast Asia's share has also risen sharply from less than 1% to 10%. SIA pointed out that suppliers often rely on production chains outside the country where their headquarters are located, so it is difficult to grasp the complete supply chain structure based only on company registration or headquarters location. What’s more noteworthy is that the above data only covers equipment and materials directly purchased by the U.S. chip industry, and does not include more upstream raw materials and components, and China’s influence in these fields is even more obvious. According to SIA statistics, China accounts for approximately 95% of global gallium supply and approximately 85% of tungsten supply. Among them, gallium can be used to manufacture compound semiconductors, while tungsten can be further processed into chemical materials required for thin film deposition in wafer processes. As for rare earths, China accounts for about 95% of the combined supply of neodymium and chromium, and a similar proportion of the supply of chromium. These rare earth elements can be used to make high-performance magnets, which are widely used in motors, robots and precision systems inside semiconductor manufacturing equipment. In this regard, SIA warned that the equipment and materials required for U.S. semiconductor manufacturing still rely on fragile inputs hidden deep in the global upstream supply chain. Related risks not only affect the United States, but may also affect the semiconductor industry of partner countries. In fact, China has implemented export licensing requirements for specific gallium products, some tungsten products, and related products involving seven medium and heavy rare earth elements. Beijing announced broader export control measures in October last year, but their implementation has been suspended until November 10, 2026, while the previous export licensing regulations will remain in effect. After Chinese President Xi Jinping paid a state visit to the United States last month, the White House said the United States and China continued to address U.S. concerns about shortages of rare earths and other critical minerals and hoped to restore supplies of related products. However, the South China Morning Post pointed out in March this year that even though some export control measures have been relaxed, U.S. companies still face shortages of key minerals. In response, SIA called on the United States to prioritize stockpiling critical raw materials and work with allies to establish alternative sources of supply. The association warned that new production capacity for some materials may take more than 10 years to establish, and it may take an additional 3 to 4 years for new suppliers and materials to be verified for semiconductor production.