Semiconductor Supply Chain
The semiconductor supply chain encompasses the interconnected stages required to design, manufacture, and distribute integrated circuits. Historically, this supply chain has been characterized by significant specialization and geographic fragmentation, with different companies specializing in distinct phases—design, fabrication (foundries), packaging, testing, and distribution. This division of labor has enabled efficiency and expertise concentration, but has also created vulnerabilities through concentrated dependencies on specific suppliers and geographic regions.
Traditional Structure and Fragmentation
The conventional model separates the supply chain into specialized sectors. Fabless companies handle chip design, foundries such as TSMC and Samsung manage manufacturing, while packaging and testing are often outsourced to dedicated firms. This structure has allowed companies to focus on core competencies and achieve economies of scale, but concentration in key regions—particularly Taiwan for advanced fabrication and East Asia for assembly—has created supply chain bottlenecks during disruptions.
Vertical Integration Trends
Some technology companies have pursued vertical integration strategies to reduce dependencies and secure control over critical manufacturing capabilities. This approach involves developing in-house fabrication capacity and securing proprietary chip designs aligned with specific product needs. By internalizing multiple stages of the supply chain, vertically integrated companies aim to improve production timelines, reduce reliance on external suppliers, and maintain technological differentiation.