Why Do So Many Countries Struggle To Succeed With Semiconductors?

With how much of our world relies on semiconductors, it’s surprising how challenging they are to manufacture. One might think that by now, every country would be able to manufacture and produce these technological marvels. However, even in 2023, there are only a handful of locations that are able to produce semiconductors at a large enough scale to be practical.

Taiwan happens to be an obvious example, as are South Korea and Japan. However, in recent years, even the United States and China have taken the field more seriously. Last year, President Biden signed the “Chips for America” legislation, that set aside over $50 billion in subsidies for homegrown semiconductor research.

At the same time, U.S. restrictions are also causing China to grow its own semiconductor industry. That said, it will be a while until either country can match established players like Taiwan.

Why is that? Let’s find out.

Capital and Investment Challenges

A key reason that so many countries find it hard to manufacture semiconductors on a large scale is sheer cost. It is far more cost-effective to order from plants like TSMC than to attempt to create a similar manufacturing hub.

The amount of financial resources it takes to set up not just the manufacturing plant, but also the supply chain is tremendous. If you guess a figure, it’s probably higher. Some sources estimate that a fully self-sufficient local supply chain will need a minimum of $1 trillion.

The manufacturing equipment is in the millions, and equipment like EUV scanners can be as expensive as $350 million each. When you realize that a manufacturing plant will need hundreds of such pieces of equipment, you understand the sheer amount of capital needed.

The Expertise and Infrastructure Needed

The raw quality and precision of silicon wafers are also something that requires significant attention. Why is this difficult? Well, semiconductor manufacturing occurs in several stages. Accuracy and precision are critical for each stage. A single error can damage the entire chip and even lead to it being trashed. As a result, technicians need to have the highest level of experience.

Their understanding of concepts in advanced chemistry and engineering has to be top-notch. For instance, compounds like NF3 play a critical role in the manufacturing process. Engineers need to have a solid understanding of the NF3 Lewis structure, among other aspects.

NF3, as Proprep explains, refers to nitrogen trifluoride. It is used extensively in the cleaning and etching of silicon wafers. While there are alternatives like F3NO and chlorine or hydrogen bromide, they may not be as effective as NF3.

Engineers need to be skilled and experienced with lithography, chemical mechanical polishing, and, of course, etching.

The problem is not a lack of skilled engineers. America and China can easily field great talent in every niche. The issue is a lack of infrastructure and a strong enough R&D sector that can make use of said talent.

Other Challenges to Note

Another interesting and particularly concerning problem is Moore’s Law. This refers to Gordon Moore’s prediction that the number of transistors accommodated on a microchip would double every two years. However, figures like Jensen Huang have infamously stated that Moore’s Law is now dead.

In other words, to stop expecting exponential performance increases every two years. There is some truth to this. It is taking longer to double the number of transistors on a microchip. Moore’s Law could, therefore, be amended to a three to four-year window.

A side effect of this challenge is that there is more investment going into finding alternative sources of performance gains. The clearest example would be NVIDIA’s focus on AI-assisted upscaling technology to produce performance boosts that cannot be achieved by pure rasterization.

The rising cost of manufacturing is also a major concern. Inflation, chip shortages, and increased R&D costs are all making it tough for manufacturers to keep costs down.


Thus, we can see that several factors contribute to the difficulty of manufacturing semiconductors. That said, many countries are starting to realize the dangers that come with overly relying on an external source.

This is especially the case when geopolitical tensions can cause sudden disruptions that can create untold havoc. No one wants to find out what the world will look like if Taiwan is annexed by China and its semiconductor plants are either self-destructed or taken over. It’s a smart move for countries with the means to start looking into domestic manufacturing as soon as possible.