By Peter Zeihan on September 17 2021
So, what does keep my up at night?
The current global semiconductor supply chain. Distinct capabilities exist in separate supply chains and manufacturing bases—lower end supply from China, higher-end chips from places like Taiwan and South Korea. And a critical middle-ground from Southeast Asian suppliers like Thailand and Malaysia.
Shortages in the supply chain—whether related to COVID-19, drought, or shifting consumption patterns—can take months to resolve. This is due as much to the actual process of silicon wafer and chip manufacturing as it is the nature of the supply chain itself. Northeast and Southeast Asian suppliers do not compete in the same arena or possess analogous skill sets. China cannot step in to produce the mid-tier chips Malaysia and China supply to global automakers (with many auto factories currently idling due to a lack of supply) and even if the Koreans and Taiwanese wanted to retool their entire factories to supply the automotive industry there is a dearth of global capacity to step in to offset the drop in high-end chip manufacturing. And this doesn’t even begin to consider the fact that regardless of where the chips are made, most are designed in the US.
The global semi-conductor industry is one of the biggest success stories, and thereby one of the most dependent, of the Global Order. If my forecast about a collapse of the global trade order is correct, it will realistically take years for countries like the US to recreate a multi-layered semiconductor manufacturing base domestically. The rest of the world will struggle to maintain any output on their own.