Almost every phone, car and data centre on the planet depends on advanced semiconductors, and the most sophisticated of them are made by a handful of companies concentrated in Taiwan and South Korea. Understanding why explains a lot about modern geopolitics.
The foundry model
The industry split into two kinds of company. Fabless firms design chips but own no factories. Foundries manufacture those designs for a fee. Taiwan pioneered the pure-play foundry, letting designers anywhere in the world turn blueprints into silicon without spending tens of billions on a factory.
Why leadership is so concentrated
Building a leading-edge fab costs a fortune and takes years, and each new generation of chips is harder than the last. The companies that stayed at the frontier compounded their lead: more customers funded more research, which produced better processes, which won more customers.
- Leading-edge fabs can cost well over US$20 billion each.
- Only a few firms can reliably make the most advanced nodes.
- Memory chips are similarly concentrated in South Korea.
Why it matters beyond tech
This concentration makes the chip supply chain a strategic pressure point. Governments in the United States, Europe, Japan and India are now spending heavily to build domestic capacity, while the existing leaders expand abroad. The result is one of the defining industrial contests of the era — and much of it runs through the Asia-Pacific.