Silicon's Slow Fracture
The chip supply chain is not decoupling so much as duplicating — at enormous cost, and with no guarantee the copies will ever run at scale.
Every advanced fab under construction in Arizona, Ohio, or Dresden is, in one sense, a monument to redundancy. The industry spent four decades concentrating the most difficult steps of chipmaking into a handful of campuses in Taiwan, South Korea, and a few coastal cities in Japan, because concentration was efficient: one set of engineers, one supply base for exotic gases and photoresists, one accumulated body of tacit knowledge about why a particular etch tool drifts on Tuesdays. Governments are now paying, by the estimate of most people who follow the subsidy programs closely, on the order of $80 billion to $100 billion in direct incentives to build a second, third, and fourth copy of that concentration elsewhere. This is not reshoring in the sense the phrase implies — production coming home to a market it once served. It is duplication: building parallel capacity that the global market did not ask for and, by most demand projections, does not yet need at full utilization. The distinction matters, because a duplicated supply chain behaves differently than a relocated one, and the difference shows up first in the numbers nobody wants to put in a press release.
The arithmetic of a second fab
Start with the plain cost premium. Industry cost models — and here I am working from the range that equipment vendors and fab economists have converged on publicly, not a proprietary figure — put the total cost of owning and operating a leading-edge logic fab in the United States at somewhere between 25 and 50 percent above the same fab in Taiwan, once you account for construction costs, permitting timelines, and above all the ongoing wage and utility differential. Some of that gap is one-time: American construction labor is expensive and American permitting is slow, so the capital cost of the building itself runs high but is a sunk cost. The more durable piece is operating cost, particularly the cost of the specialized technician and engineering labor that keeps yields climbing after a fab opens, and that gap does not obviously close with time or subsidy.
The subsidy programs — the CHIPS Act in the U.S., its European counterpart, similar efforts in Japan and India — were designed explicitly to absorb that premium, and on the capital side they mostly do. What they cannot buy is time. A leading-edge fab takes three to five years to build and typically another one to two years to reach mature yield, the point at which the percentage of usable chips per wafer reaches the low-to-mid 90s that makes a process line profitable. Yield ramp is not a matter of writing bigger checks; it is a matter of thousands of small process corrections made by engineers who have done this specific ramp before, on this specific tool set, under this specific fab’s contamination and vibration profile. That knowledge does not transfer cleanly on paper, and it does not transfer quickly in person.
Where the real bottleneck sits
This is the part of the story that gets underweighted in policy debates, which tend to fixate on the fabs themselves as the unit of sovereignty. The tighter constraint sits one layer up, in tooling and materials, and two layers up, in people. Extreme ultraviolet lithography — the technology that makes the smallest transistor geometries possible — is produced, effectively, by a single company in the Netherlands, which sources its most critical subsystems, in turn, from a small number of specialized suppliers in Germany and Japan. There is no credible near-term plan, in any country’s industrial strategy, to duplicate that capability domestically; every “domestic” advanced fab being built anywhere in the world is domestic only up to the point where it needs an EUV scanner, at which point it rejoins the same single global queue everyone else is standing in. Regionalizing fabrication without regionalizing the equipment and materials stack underneath it does not reduce the chain’s concentration risk — it just adds a second point of failure downstream of the first.
The talent bottleneck is less visible but arguably worse, because it cannot be solved by writing a bigger check to a Dutch equipment maker. Advanced semiconductor manufacturing runs on process engineers and equipment technicians with years of specific, tool-level experience, and the relevant labor markets — outside a few clusters in Asia — simply do not contain enough of these people. Every new fab now competing for the same thin pool of experienced hires bids wages up and stretches onboarding timelines, and multiple projects have quietly pushed back production start dates for reasons that trace back to staffing rather than construction. Universities are standing up semiconductor programs, and some of that investment will pay off on a ten-year horizon. It does nothing for the fabs opening in the next eighteen months.
The subsidy programs can buy a building. What they are discovering, slowly and at great expense, is that they cannot buy the decade of institutional memory that makes a building profitable.
What industrial policy can and cannot buy
None of this means the regionalization push is pointless — that would be too easy a conclusion, and probably wrong. There is a real, defensible case for duplication that has nothing to do with cost efficiency: it is insurance against a scenario in which the concentrated supply chain is disrupted by conflict, embargo, or natural disaster, and in that scenario the “wasted” premium on a second fab looks less like waste and more like a put option that finally paid off. Governments buying that insurance should be honest about what they are buying, though, and the honest framing is expensive redundancy purchased for resilience, not a cheaper or faster path to the same chips. Treating it as industrial competitiveness policy — as a way to eventually out-produce the incumbent centers on cost — sets up a comparison that the new fabs are very likely to lose for a long time, possibly permanently, given how far behind the cost curve they start.
The more interesting question, and the one industrial policy has barely engaged with, is what happens to the concentrated centers while the duplication is underway. Taiwan and South Korea are not standing still waiting to be replicated; their leading firms continue to invest at a scale the new entrants cannot easily match, and the process node gap between the frontier and the newly built fabs — which mostly enter production one to two generations behind the state of the art — shows little sign of closing. A subsidized fab that comes online trailing the frontier by two generations is not decoupling its host country from dependence on the frontier; it is adding a slower, costlier node to the country’s own menu while the dependence for cutting-edge chips persists untouched. That is arguably the most important thing to say about the whole project: it changes where some chips are made, not who makes the chips that matter most, and the two things are being sold to legislatures and the public as though they were the same achievement.
The realistic horizon
Ask industry participants privately for a timeline and the answers cluster in a similar place: partial, geography-diversified redundancy for mature and mid-range nodes within five to seven years, real cost parity essentially never under current policy designs, and leading-edge independence from the current concentrated centers not on any horizon presently being funded. That is not a failure of will or of money. It is what happens when a fifty-year process of optimization toward a small number of locations gets run partway in reverse on a decade’s notice, against physical and human constraints that do not respond to appropriations bills. The fracture is real, and probably permanent in some modest, partial form. It is just slower, costlier, and less complete than the ribbon-cuttings suggest.