UK semiconductor supply vulnerable if China invades Taiwan, says Cambridge analyst
A new report by a Cambridge-based market analyst says that nations - and the US in particular - are now reshoring their semiconductor investments as the possibility of a Chinese invasion of Taiwan starts to become a likelihood.
Dr Yu-Han Chang, principal technology analyst at IDTechEx, says in ‘Strategic Silicon: How Geopolitics Is Redirecting Semiconductor Investment’ that Taiwan's central role in the manufacture of semiconductors - Taiwan Semiconductor Manufacturing Company (TSMC) makes the vast majority of the world's most advanced silicon chips - has become a geopolitical vulnerability.
The issue is China’s territorial claim to the island (population 24 million) and its goal of “reunification”, with force not being ruled out by the Chinese government. Mounting tension could imperil the island’s strategically important semiconductor sector.
Building a fab (fabrication unit) that manufactures advanced nodes already costs a fortune - a 2nm wafer fab with high-volume output requires an enormous investment, often approaching tens of billions of dollars. But it’s not just the fab, there are also packaging considerations: replicating the entire supporting ecosystem adds substantially more.
“In response,” writes Dr Chang writes, “governments and corporations have launched a sweeping wave of reshoring efforts. In the US alone, over $480billion in semiconductor-related investments were announced between 2024 and 2025.
“Major contributors include Texas Instruments ($60bn), Micron ($200bn), GlobalFoundries ($16bn), TSMC ($165bn), and Samsung ($40bn), many supported by The Chips Act subsidies. [The US government enshrined The Chips Act in 2022, with a $280bn budget.]
“These projects are strategically positioned to develop capabilities across advanced silicon nodes, high-bandwidth memory (HBM), advanced semiconductor packaging, and silicon photonics, all critical to the AI era.
“Across Europe, the EU Chips Act is catalyzing local semiconductor ecosystems. TSMC, alongside Bosch, Infineon, and NXP, is co-investing in a 22/28 nm fab in Dresden, backed by the German government. Other key developments include Infineon's €3.5bn MEGAFAB project and Silicon Box's €3.2bn chiplet facility in Italy. These underscore Europe's ambition to reestablish sovereign manufacturing capacity.
“In Japan, TSMC's Kumamoto fab (via JASM) has begun production, and a second, more advanced fab is under construction. The government has pledged over $5.4bn to Rapidus, aiming for 2nm pilot production by 2027. South Korea continues expanding its HBM and logic production with strong state backing.”
The UK semiconductor industry is strategically important and contributes an estimated £9.6bn annually to the UK economy. However, it is largely involved in semiconductor design and research, rather than manufacturing.
In Cambridge, Cambridge GaN Devices specialises in gallium nitride (GaN) semiconductors, which are more energy-efficient than traditional silicon chips, while Pragmatic Semiconductor focuses on flexible integrated circuits.
“The once-global semiconductor ecosystem is fracturing into regionally anchored supply networks, where national security instead of cost-efficiency increasingly shapes location strategy,” concludes Dr Chang. “The de-globalisation of chip production isn't just a reaction to geopolitical risk; it reflects a deeper structural realignment.
“In this new era, semiconductors are no longer defined solely by performance; they have become instruments of sovereignty, security, and strategic leverage.”
