How Semiconductors Are Made? (Inside the World’s Most Complicated Supply Chain)

The chip in your phone may have crossed more borders than you did on your last vacation. Its design may have started in the United States. The machine used to manufacture its most microscopic features may have come from a Dutch company. Some of its materials may have come from China or Japan. It may have been fabricated in Taiwan, packaged somewhere else in Asia, and finally assembled into your phone somewhere else entirely.

And that’s the simple version.

What Exactly Is a Semiconductor?

In everyday conversation, people use “semiconductor” and “chip” almost interchangeably. Strictly speaking, a semiconductor is a material, one that isn’t a full conductor like copper or a full insulator like rubber, but something in between that can be switched on and off with precision. A chip (or integrated circuit) is the manufactured device built from that material, containing billions of those switches working together.

That switching ability is what powers everything from your smartphone to satellites, medical equipment, cars, and data centers.

Silicon Is the Star, But It Isn’t the Whole Story

Silicon is the workhorse of the industry, the dominant material behind the vast majority of chips manufactured worldwide. But it isn’t the only semiconductor material that matters.

• Gallium compounds (like gallium arsenide and gallium nitride) show up in high-frequency, high-power applications: radar, satellite communications, 5G equipment
• Germanium is used in specialized applications including fiber optics, infrared optics, and certain space-related solar cells
• Other materials, like silicon carbide and indium phosphide, fill their own niches

Here’s the part that makes this genuinely interesting: these materials are extraordinarily concentrated in one country. According to the U.S. Geological Survey, China accounts for roughly 98 to 99% of the world’s primary refined gallium production. Its share of germanium production is estimated at somewhere between 60 and 68%, depending on the year and whether you’re measuring raw production or refining capacity. And for metallurgical-grade silicon, the raw material used across industry and electronics, China’s share was around 85% in 2024.

That’s a striking concentration, but it’s worth being precise about what it means. Gallium and germanium aren’t the main bottleneck for most ordinary silicon chips. The real story isn’t that China controls “semiconductors.” It’s that different pieces of this industry are each highly concentrated in different places, which is exactly what makes the whole system both powerful and fragile.

Why This Matters

Here’s the question worth asking before diving into the supply chain itself: why should anyone outside the tech industry care how a chip gets made?

Because the more specialized a supply chain becomes, the more efficient it gets, but also the more exposed it becomes to a single point of failure. If one critical supplier slows down, tightens export controls, or faces a disruption, an entire global industry can feel it within weeks. That’s not a hypothetical. It’s already happened with gallium and germanium export licensing, and it’s the reason governments now treat chip supply chains as a matter of national strategy, not just commerce.

The Journey of a Chip

A modern chip doesn’t move through a handful of countries in a neat line. It passes through a genuinely global network of specialists. Here’s a simplified version of that journey:

DESIGN
United States (EDA software, chip IP)
        ↓
EQUIPMENT + MATERIALS
Netherlands, Japan, China, and others
        ↓
WAFER FABRICATION
Taiwan, South Korea, United States, and others
        ↓
PACKAGING + TESTING
Malaysia, Taiwan, China, and others
        ↓
ELECTRONICS ASSEMBLY
China, Vietnam, Malaysia, and others
        ↓
YOUR PHONE

1. Design (mainly the United States). Companies like Nvidia and Apple, largely based in California, design chip architecture, the blueprint that determines a chip’s power and efficiency. This stage also depends on specialized design software (EDA tools) and licensed intellectual property, an industry of its own that’s heavily concentrated among a small number of American firms.

2. Manufacturing equipment (the Netherlands and Japan). Before a chip can be printed onto a silicon wafer, manufacturers need extraordinarily precise machines. A Dutch company, ASML, is the world’s sole supplier of EUV (extreme ultraviolet) lithography systems, the technology required to etch the smallest, most advanced transistor features. Imagine needing a machine so complex that the machine itself is one of the most technologically sophisticated products on Earth, just to build another one.

But even ASML’s rests on other people’s work. Its own 2025 annual report counts roughly 5,100 suppliers behind each system, and a single EUV machine contains well over 100,000 parts. Its optics come exclusively from Zeiss in Germany; its light source depends on lasers from Trumpf. Even the company that has a monopoly on one of the world’s most critical technologies can’t build its machine from scratch alone. That’s the whole thesis of this article in one company.

3. Wafer fabrication (Taiwan, South Korea, and others). This is where the actual chip gets printed onto silicon. Taiwan, home to TSMC, is a major center of advanced fabrication. TSMC’s own 2025 annual report shows that processes at 7 nanometers and below accounted for 74% of its wafer revenue in 2025, up from 69% the year before. That figure describes TSMC’s own revenue mix, not the global share of advanced chips overall, since other companies and countries also manufacture at the leading edge. Still, it illustrates how concentrated TSMC itself has become in advanced work.

4. Assembly, testing, and packaging (Malaysia and others). Once wafers are fabricated, they need to be cut, tested, and packaged into finished chips. This is a different job from fabrication, and Malaysia has built a genuine specialty here, holding roughly 13% of the global market for semiconductor assembly, testing, and packaging services, according to the Malaysian Investment Development Authority.

5. Final assembly (often China). The finished chips are shipped to be installed into phones, laptops, and appliances sold around the world.

The Countries That Dominate Different Pieces

Put together, the picture looks less like a chain and more like a network of specialists, each holding a piece no one else can easily replace:

• United States, chip design, EDA software, semiconductor IP
• Netherlands, advanced lithography equipment
• Japan, specialty materials and manufacturing equipment
• Taiwan, advanced wafer fabrication
• South Korea, memory chips and fabrication
• Malaysia, assembly, testing, and packaging
• China, raw materials, mature-node manufacturing, and final electronics assembly

The concentration is severe. According to the OECD’s 2025 mapping of global wafer fabrication capacity, China, Taiwan, South Korea, Japan, and the United States together account for 87% of the world’s in-production wafer fabrication capacity as of September 2025.

Why This Supply Chain Is Both Powerful and Fragile

There’s a simple way to understand why this system exists at all: the semiconductor industry became extraordinarily powerful by dividing an extraordinarily difficult problem into specialized pieces.

The US didn’t need to build the world’s best lithography machines. The Netherlands didn’t need to manufacture the world’s most advanced processors. Taiwan didn’t need to dominate chip design. Each economy went deep on one piece of an impossibly complex puzzle, and global trade stitched those pieces into a working system.

The breakthrough wasn’t making everything. It was becoming exceptionally good at one part of the chain.

That’s also exactly why the system is fragile. When expertise this specialized and irreplaceable gets concentrated in a handful of places, a disruption anywhere in the chain, a trade restriction, a natural disaster, a geopolitical dispute, can ripple through the entire global technology industry at once.

So What Does This Have to Do With Republika Srpska?

The obvious question for a small economy isn’t “how do we build the whole semiconductor industry?” Nobody in Banja Luka is going to build a lithography machine or a fabrication plant. The better question is: which part of this enormous chain could we realistically become good at?

A few ideas worth taking seriously:

1. Design verification and validation. Before a chip goes into fabrication, engineers use simulation, formal methods, and specialized software tools to test whether its logic behaves as intended, catching errors that would be catastrophic and extremely expensive to fix after manufacturing. This is highly specialized engineering work, but unlike a fab, it doesn’t require billions in capital. It requires trained engineers and a strong testing culture, which could build on the region’s existing IT education and software-engineering capabilities.

2. Embedded systems and semiconductor-adjacent engineering. Not every company in this ecosystem designs chips. Many need engineers who work with microcontrollers, embedded Linux, firmware, device drivers, and industrial electronics, skills that connect directly to the region’s existing software and IT outsourcing sector rather than requiring an entirely new industry to be invented from scratch.

3. Workforce and education as the actual export. Across much of this supply chain, skilled people are a bottleneck alongside capital, equipment, materials, and infrastructure. A small country that builds strong, practical technical education in digital design and hardware-adjacent software creates an exportable asset: engineers who can plug into this global chain remotely, or who attract regional employers looking to set up smaller engineering hubs.

None of this means Republika Srpska builds chips. It means finding the thin, specialized slice of a massive global network where skilled people and reliable delivery matter more than raw industrial scale, which is essentially the same logic that let much smaller players than the US or China carve out real positions in this industry.

The Bigger Lesson

A chip looks tiny because the technology has become incredibly good at shrinking things. But the system behind that tiny piece of silicon is enormous. It stretches across continents, companies, universities, factories, chemical suppliers, and highly specialized engineers, none of whom could build the whole thing alone.

In a world built on specialization, you don’t have to make everything to become valuable. You have to become exceptionally good at something the rest of the world needs.

FAQ

How many countries does it take to make a semiconductor?

There’s no single number, since different chips use different suppliers and manufacturing routes. Modern chip production involves a globally distributed network of companies across design, materials, equipment, fabrication, packaging, and testing.

Why can’t one country manufacture the entire chip?

Because semiconductor production requires extremely specialized technologies and enormous capital investment. Different economies have developed deep expertise in different parts of the value chain, and no single country holds all of it.

Why is Taiwan so important to semiconductors?

Taiwan is a major center of the world’s advanced wafer fabrication. TSMC alone drew 74% of its 2025 wafer revenue from its most advanced process nodes (7nm and below), according to the company’s own annual report.

Why is ASML so important?

ASML is the world’s sole supplier of EUV lithography systems, the machines required to manufacture the most advanced chips on Earth. Yet even ASML depends on roughly 5,100 of its own suppliers, a reminder that no single company, however dominant, builds this technology alone.

Could a small country participate in the semiconductor industry?

Yes. The ecosystem includes far more than fabs: it also includes design, verification, embedded software, testing, packaging, and specialized engineering services, several of which are realistic entry points for smaller, skilled economies.

Sources

• U.S. Geological Survey, Gallium Mineral Commodity Summaries 2024: https://pubs.usgs.gov/periodicals/mcs2024/mcs2024-gallium.pdf
• CSIS, “Beyond Rare Earths: China’s Growing Threat to Gallium Supply Chains”: https://www.csis.org/analysis/beyond-rare-earths-chinas-growing-threat-gallium-supply-chains
• PricePedia, “Metallic silicon: a critical and strategic commodity for the EU” (China’s ~85% share of metallic silicon production, 2024): https://www.pricepedia.it/en/magazine/article/2025/10/13/metallic-silicon-a-critical-and-strategic-commodity-for-the-eu/
• TSMC 2025 Annual Report: https://investor.tsmc.com/static/annualReports/2025/english/index.html
• OECD, “The Chip Landscape: Geographical Distribution of Wafer Fabrication Capacity,” Policy Paper No. 188 (2025): https://www.oecd.org/en/publications/the-chip-landscape_02dbd028-en/full-report/component-6.html
• Malaysian Investment Development Authority, “Securing Malaysia’s Position in the Global Semiconductor Supply Chain”: https://www.mida.gov.my/mida-news/securing-malaysias-position-in-the-global-semiconductor-supply-chain/
• FrontierMap, “ASML: The Supply Chain Behind the EUV Machine” (citing ASML’s 2025 annual report, 5,100 suppliers): https://frontiermap.substack.com/p/asml-the-supply-chain-behind-the