Insights

The semiconductor industry is at a critical juncture, shaped by intensified geopolitical tensions, evolving trade policies, and shifting alliances globally. The U.S.-China rivalry remains central, driving strategies like friendshoring and government interventions such as the CHIPS Act, all of which are reshaping semiconductor value chains and market dynamics worldwide.

Friendshoring and Semiconductor Supply Chains in 2025

Friendshoring continues to gain prominence as countries realign semiconductor supply chains toward trusted partners to reduce risk. As of 2025, nearly 80% of semiconductor executives consider friendshoring a vital part of their near-term sourcing strategy, according to McKinsey. The U.S. has deepened cooperation with allies like Japan, South Korea, Taiwan, and India, forming a more resilient and secure supply network. Taiwan’s TSMC has escalated its U.S. investments to over $60 billion, with new advanced 3nm fabs expected to start production by 2026. Samsung has expanded its Texas mega-fab project to $25 billion to accelerate next-generation memory and logic chip manufacturing. India launched its $20 billion National Semiconductor Mission with the goal of increasing its chip manufacturing market share to 7% by 2030. This strategic pivot responds to ongoing concerns about supply chain disruptions amidst Sino-American tensions, seeking to reduce dependence on China, which still supplies around 18% of global semiconductor raw materials.

The CHIPS Act’s Growing Influence

Since its passage in 2022, the CHIPS Act implementation has accelerated, with the U.S. government pledging an additional $20 billion in funding in 2024 to expand efforts in research and development, workforce development, and manufacturing incentives. Total federal funding now surpasses $70 billion. U.S. semiconductor manufacturing capacity is projected to rise to approximately 32% of global output by 2030, up from 12% in 2021. Intel plans to invest nearly $120 billion in new fabs across Arizona, Ohio, and other states, driven by CHIPS Act incentives and market demand. Micron and GlobalFoundries are also investing billions to expand chip fabrication capacity domestically. It is important to note that the government does not directly invest equity in companies like Intel but provides substantial subsidies and incentives that enable these private sector investments. This approach is designed to reduce reliance on foreign sources, particularly China and Taiwan, and restore U.S. technological competitiveness.

Geopolitical Tensions and Market Impact

Geopolitical frictions remain elevated, with the U.S. imposing tighter export controls on advanced semiconductor manufacturing equipment to China during 2024 and 2025. These restrictions have slowed China’s ambitions for an indigenous advanced chip industry, which now targets 20% self-sufficiency by 2030, slightly delayed compared to earlier projections. China’s $200 billion semiconductor industry stimulus remains a state priority but is challenged by limited access to leading-edge equipment such as EUV lithography machines. South Korea must carefully balance its alliance with the U.S. and economic ties to China. Samsung and SK Hynix are expanding joint ventures in the U.S. and Europe to diversify geopolitical risks. Other emerging players capitalize on these shifts. India’s semiconductor ecosystem is expanding rapidly, supported by a $20 billion plan and partnerships with U.S. and European firms. Semiconductor exports from India reached $5 billion in 2024 and are expected to triple by 2030. Southeast Asia’s Malaysia and Vietnam remain key assembly and testing hubs while undergoing pressure to diversify suppliers and align with friendshoring policies in response to U.S.-China trade tensions.

Global Market Trends and Future Outlook

The semiconductor market valuation reached approximately $700 billion in 2024, with a compound annual growth rate forecast of 7 to 8 percent through 2030. Key demand drivers include artificial intelligence, 5G and 6G telecommunications, electric vehicles, and Internet of Things applications, all requiring advanced semiconductor technologies. The industry is bifurcating between trusted supply chains anchored by the U.S., Japan, South Korea, Europe, and India that focus on advanced logic, memory, and foundry fabrication, and China-centric supply chains emphasizing legacy nodes and government-supported fabs striving for partial technological independence. This division creates opportunities for allied nations to lead semiconductor innovation while presenting risks of further supply disruptions and trade barriers.

Technological Innovation and Workforce Development

A critical but often overlooked factor reshaping semiconductor geopolitics is the race for technological innovation and the skilled workforce to sustain it. The U.S. and its allies are investing heavily in semiconductor research and development centers focusing on next-generation chip architectures, quantum computing applications, and energy-efficient designs. Workforce development programs funded under the CHIPS Act and allied initiatives aim to address the acute shortage of semiconductor engineers and technicians. Globally, the semiconductor workforce is expected to grow by 40 percent by 2030, requiring robust educational pipelines and retraining schemes. Collaboration between academia, industry, and government is intensifying to accelerate innovation cycles and technology transfer, especially within allied countries participating in friendshoring networks. Countries that fail to develop competitive innovation ecosystems risk losing ground in this technologically demanding and politically sensitive sector.

Conclusion

In 2025, the semiconductor sector remains a geopolitical hotspot essential to technological and economic dominance. Friendshoring, government-backed incentives like the CHIPS Act, and targeted innovation and workforce strategies are driving a global transition toward diversified, secure, and advanced semiconductor ecosystems. Trusted partners such as the U.S., Japan, South Korea, Europe, and India stand to gain from this realignment, but challenges persist for nations heavily dependent on China or caught between rival trade blocs. Navigating these complex geopolitical shifts and investing in technology and talent will be essential for stakeholders aiming to lead the future semiconductor landscape.