Semiconductor Supply Chains, AI Surge, and Global Stakes

Name: How AI Is Pushing the Semiconductor Supply Chain to the Limit | Bloomberg Primer
Uploaded: 2026-05-06T08:00:36+00:00
Duration: 24 min 4 s
Channel: Bloomberg Originals
Description: Summary and key takeaways on Semiconductor Supply Chains, AI Surge, and Global Stakes, covering The Semiconductor Ecosystem Chips are fabricated in ultra‑clean

Bloomberg Originals

May 06, 2026

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24 min video

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2 min read

YouTube video ID: VdcD6qX8Xrc

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Chips are fabricated in ultra‑clean rooms where a single skin cell can ruin a wafer, underscoring the extreme sensitivity of the process. Lithography directs light through mirrors and lenses to imprint circuit patterns onto silicon; ASML supplies the only extreme ultraviolet (EUV) machines capable of printing the smallest features. Each EUV system costs about $400 million and occupies the size of a double‑decker bus. Advanced chips require these massive tools, and the final step—singulating—cuts the wafer into individual chips. Transistors act as nanoscopic light switches that encode the binary ones and zeros of digital information, while analog chips handle essential power‑management functions.

Market & Economic Trends

The semiconductor industry is on track to generate $1 trillion in revenue by 2026. AI chips already accounted for more than 25 % of sales in 2025 and are expected to surpass 50 % by 2029, reflecting a shift from consumer electronics to massive AI infrastructure and data centers. Texas Instruments leans into “analog” or “essential” chips, using 300 mm wafers to boost output and lower costs. Larger wafers increase surface area by 2.3 times, delivering higher yields per production run.

Supply Chain Vulnerabilities

More than 90 % of the world’s most advanced chips emerge from TSMC’s factories in Taiwan, creating a fragile concentration point. Natural disasters, earthquakes, or regional conflicts could disrupt this ecosystem, potentially costing the global economy up to $10 trillion. The industry’s reliance on a single supplier of EUV lithography machines—ASML—adds another bottleneck, described as “the bottleneck of all bottlenecks.”

Global Competition & Reshoring

Governments pour billions into reshoring efforts to secure technological sovereignty. The United States allocated $52 billion through the 2022 CHIPS Act and supports TSMC’s $165 billion investment in an Arizona fab, often dubbed the “Silicon Desert.” China pushes self‑reliance, with Huawei spearheading secret factories to bypass U.S. sanctions. Texas Instruments pursues analog dominance by scaling production on 300 mm wafers, while other firms cluster new fabs near existing sites to share logistics and skilled labor.

Technological Evolution

The move from cyclical growth to sustained AI‑driven demand reshapes the industry’s economics. Wafer scaling, EUV lithography, and the relentless miniaturization of transistors drive higher performance while inflating capital costs—each leading‑edge plant requires roughly $30 billion in investment. The combination of these advances and geopolitical pressures makes semiconductor manufacturing “like building a house of cards with thousands of people located on multiple continents.”

Takeaways

Chips are the foundational components of modern economies, powering everything from household appliances to AI supercomputers.
The semiconductor supply chain is highly concentrated, with over 90% of advanced chips produced by TSMC in Taiwan, making it vulnerable to natural disasters and geopolitical tensions.
AI-driven demand is shifting chip sales toward data centers, with AI chips projected to exceed 50% of semiconductor revenue by 2029.
Massive investments such as the US CHIPS Act, TSMC’s $165 billion Arizona project, and China’s self‑reliance push illustrate the geopolitical race to secure domestic chip manufacturing.
Advanced lithography, especially ASML’s $400 million EUV machines, and the move to 300 mm wafers are critical technological levers that determine production capacity and cost efficiency.

Frequently Asked Questions

Why is Taiwan considered a critical point of failure for the global semiconductor supply chain?

Taiwan hosts TSMC, which manufactures over 90 % of the world’s most advanced chips, so any disruption—earthquake, conflict, or pandemic—can halt production and trigger massive economic losses. The concentration creates a single point of failure that the global economy heavily depends on.

How does ASML’s EUV lithography technology impact chip manufacturing costs and complexity?

EUV lithography enables the printing of extremely small circuit features, essential for leading‑edge chips, but each machine costs about $400 million and requires a massive, ultra‑clean facility. This raises capital expenditures and operational complexity, making EUV a critical bottleneck in scaling advanced semiconductor production.

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- We're entering the
first of four factories.
- This is one of the cleanest
factories in the world.
- How clean is clean?
- Even a single skin cell
can actually kill one
of our chips that we make here.
- Chips like these.
The smallest components on
today's chips are smaller than
the size of a virus,
approximately 50,000 times
smaller than the width
of a human hair.
And fragile as they may be,
today's most expensive chips
sell for upwards of $30,000 each
and are reportedly transported
in armored vehicles.
We're talking about the massive,
highly lucrative heartbeat
powering the global economy.
- A trillion semiconductor
devices are shipped every year.
That's a hundred devices
for every person on Earth.
- They're the foundation
of economic growth
around the world, and it brings
together the best scientific
minds to push progress forward.
- The chip industry is projected
to hit $1 trillion in revenue in 2026,
and thanks to AI,
everyone is talking about it.
- Artificial intelligence boom.
- My beat went from obscure backwater
that people had sort of heard of
to being the center of technology.
- What is widely considered
to be the most complex
manufacturing process on Earth is
facing the limitations
of our physical world.
- We are pushing the envelope
of technology in multiple
directions: software, hardware,
chemistry, physics in all dimensions.
- Unprecedented market conditions.
- Demand for AI infrastructure
is absolutely massive.
It appears to be insatiable right now.
- Vulnerable choke points.
- The modern economy is likely to collapse
if something happens
to Taiwanese chip ecosystem.
- So just how resilient is the industry
that requires this many layers of clothing
to function?
Right this way.
Nestled among windmills
and canals, surrounded by
charming cottages and cyclists,
you will find Europe's most
valuable tech firm,
well known for
- Lithography.
- Lithography.
- The lithography tools
that they create are some
of the most fabulously complex
and difficult to perfect
machines in the world.
- ASML doesn't make chips.
It makes machines that make chips
and offers tech that no
other company has been
able to recreate.
Lithography is a process that
directs light through a series
of mirrors, lenses
and a special blueprint
to transfer patterns onto silicon wafers.
Essentially shrinking chip
designs down to sizes invisible
to the human eye and creating
the electrical pathways
that give a chip its function.
- All of the manufacturers
of the most advanced chip in the world,
whether they say it publicly
or not, use ASML's machines
or are about to use ASML's machines.
- The nano patterning machine is one
of the most critical steps
in the semiconductor making.
People buy new phones
because you get more
capabilities for the same money.
So you must find a way to
print much smaller features,
but at much higher productivity.
- In order to make the next generation
of chips even more intricate,
ASML literally had to develop
a way to generate a type
of light that does not naturally
occur on earth's surface
called EUV, extreme ultraviolet.
The system is as big as a double
decker bus, weighs as much
as a blue whale
and will run customers
$400 million per machine.
- That's a, that's a good question.
First of all, as you want to
print smaller resolution,
you make the opening
angle of the lens bigger.
- Bigger lenses can
collect more information
to squeeze onto the surface of the chips.
- The second reason is in order
to have the speed, you need
very fast moving stages.
- Litho machines can repeatedly
copy a pattern onto a wafer
hundreds of thousands of
times within about 12 seconds.
- The reticle stage can move
about 20G, four times more
acceleration than the
most advanced fighter
jets in the world.
In order to have that power to accelerate
that fast, you need big motors.
- The smaller or more complex the chip,
the bigger the machine needs to be.
There's no avoiding it.
All of the world's most advanced
litho machines
come from ASML.
It is one hyper specialized
link in this highly concentrated
supply chain that is under
more pressure than ever before.
All eyes are on the companies at the top
and whether they're up for the challenge.
- We design the semiconductor products
that really drive the
leading edge of compute.
- This is AMD.
Advanced Micro Devices.
Worth more than $300 billion,
it's a place where
engineers fill their thermoses
with liquid nitrogen, where
stock prices have been known
to triple. AI is hot.
- You hear it sizzle all of a sudden.
- And occasionally employees
appear out of thin air.
- Oh, you guys are getting
firsthand view of how this works.
We're delivering server chips
that go into supercomputers,
networking chips
that connect the world together,
on down to the consoles
that you use to play your latest games.
But the common theme in all
of them is they require
certain compute capabilities
and energy efficiency.
- The switches and chips
are called transistors.
They're sort of like
nanoscopic light switches
that control the flow of electricity
and generate the classic ones
and zeros that ultimately
make up every piece
of digital information
in our modern devices.
Chips are everywhere.
It's how your phone
unlocks, your robot vacuum navigates,
and how your coffee maker somehow connects
to wifi.
Sometimes.
- When you think about
the modern economy, right,
and you think about how
goods are produced today,
what you recognize is that
chips have become ubiquitous.
It's very difficult to find
anything that you can plug in
or that runs on a battery that
doesn't have a semiconductor
of some form in it.
- The stock market loves chips.
Sorry, I may be underselling this a bit.
The stock market is
going absolutely bonkers.
- The latest blockbuster AI
chips deal with AMD soar.
- I mean, holy moly, Batman, the AI rally
and the chip grab, it is on in a big way.
- And AMD has turned the demand
for AI chips into a new multi-billion
dollar part of its business.
- All right, so this is a wafer.
This is how we build our products.
You can see where all
of the various individual
chips are printed.
So this wafer probably has
around three or 400 chips printed
and after you singulate them,
- A fancy way of saying wafers are chipped
into individual chips,
which is actually the origin
of the term "chip".
- You have products such
as this, this is a chip
that would run your PC.
- Basic chips are called
analog or essential,
and they quite simply have
more basic functions as sensors
or power switches.
More advanced chips are
referred to as, well, advanced.
This could be your run of the mill CPU
or GPU, the brains of the
computer that are computing
and performing more elaborate tasks.
The most specialized AI chips
are designed to not only run
but create software to process droves
of data in a matter of milliseconds.
- Just to see a contrast,
you know, this is a PC,
this is a server, this is AI,
and the amount of silicon
is immensely higher.
This central region here
is actually many chips
with some stacked on top of the other,
and then the eight
individual chiplets on the
outside are our memory
stacked 12 layers high,
and so we're able to get more
energy efficient AI compute.
- Of course, AI is booming.
AI chips accounted for
more than one quarter
of all chips sold in 2025.
That figure is expected to
reach more than half by 2029.
Chip demand is no longer
dictated by which new iPhone
or PC will have customers lining up.
- What has changed over the
years in the semiconductor
industry is since we're seeing
such a surge in the need
to build data centers for AI deployment
and applications, we're
seeing a more sustained growth
period in semiconductors as opposed
to the old fashioned cyclical,
when we used to have
Intel come out with chips
that everybody had to
upgrade their computer for.
- Spending on AI infrastructure
like data centers is
projected to soon cross
the $1 trillion mark.
So the demand for these chips is there.
There's just one maybe
not so nanoscopic problem.
How concentrated is too
concentrated for this supply chain?
Behind those pompoms
and smoke machines are employees
for the chip giant, TSMC.
Taiwan's Semiconductor
Manufacturing Company.
As fun as the annual
company Sports Day looks,
TSMC's role in the industry
is serious business.
- Creating semiconductors
is the most complicated
manufacturing process in the world.
- To be fair, it does require
a bit of choreography.
Making a chip is like
building a house of cards
with thousands of people
located on multiple continents.
Everyone must place
their card exactly right,
delicately balanced at the perfect time
or well, you know what happens.
The majority of chip
design happens in the US.
Raw silicon wafers are primarily
made in Japan and Taiwan,
but a few other places as well.
A lot of chip making machinery
comes from the Netherlands,
of course, the US and South Korea.
Components within those
machines are sourced
from places like Germany,
Japan, and the US.
Then, all of those things join
forces from manufacturing
magic within fabrication facilities,
FABS for short, heavily
concentrated in Taiwan.
TSMC manufactures over 90%
of the world's most advanced
chips, almost entirely out
of its Taiwan based gigafabs.
- A gigafab is a massive chip making site.
It maximizes its output
and optimizes its cost.
- It created this idea of we
can outsource manufacturing,
give us your designs and
we'll make the best chips.
Doesn't matter who's designing
them, you're going to TSMC
and you're saying,
please make this for me.
- It's basically the bottleneck
of all bottlenecks.
Smack dab in the middle of
a very complex supply chain
with no simple alternative.
- What's called bringing up a fab,
which is basically making a new factory
or a new production line
operational requires a lot of
experience and so guess what?
If you've got one next door
that's already working, why not copy that?
The logistics are very much
favor building these things in
what are called clusters and
close proximity to each other.
- These clever clusters are
also, let's say, precarious.
- There are a lot of ways
that the supply chain
for semiconductors and its
broader ecosystem
can be destabilized.
Taiwan's strongest
earthquake in 25 years.
- Disruptive side effects
of the COVID pandemic,
there is now a global
shortage of computer chips.
- A supply chain disruption
in one place can cause
repercussions in the
industry far down the line.
- To top it off, TSMC
is located at the center
of a decades long geopolitical standoff.
- Beijing has been ratcheting
up pressure staging its most
expansive military drills in decades.
- China claims Taiwan
is a Chinese territory,
but Taiwan maintains its independence,
and that doesn't make things
feel particularly stable.
- There are some concerns about
China's plans for the future
of Taiwan and whether that
could constrain the ability
of United States companies
to get those chips.
- A February 2026 Bloomberg
economics report estimates
that the world economy could
lose $10 trillion if a conflict
were to erupt.
With Taiwan hanging in the balance,
global superpowers are making moves.
- The government of the
United States has said,
hey, guess what?
This is strategically important to us.
It has massive security implications.
- The defence industry needs
very highly advanced chips
that are impervious, for
example, to space radiation,
to power satellites and
planes and things like this.
So there's a defence industry
motivation for governments
to make sure that there are the right kind
of semiconductors produced
within their country's borders.
- China doesn't feel that
it can depend on the US.
It believes in self-reliance
and technological supremacy as well,
but basically, it
doesn't want to be left out.
So it wants to develop its
own homegrown chip industry.
- Well, Huawei is China's
national tech champion.
It's a company that's known for
it's hardware prowess.
Back in 2019,
the US had imposed sanctions
on Huawei basically cutting off
its ability to get the components it needs
to make its products.
And there was a feeling that
Huawei was in a lot of trouble.
- At the time,
China was a late start
into chip manufacturing.
Less than 10% of the country's
chips were being supplied
by Chinese companies
with less advanced tech than
foreign firms, which is at odds
with the fact that China
is also the world's largest
market for chips.
- China has a massive
middle class consumer base
that it can sell electronics to.
So if it could make
and develop these capabilities
in the chip industry, then
it's almost supportable
on a domestic basis.
- But China has been notoriously secretive
about its chip industry.
- No one really knew where China stood.
We had heard
that Huawei was building some
chip factories in secret.
We identified three factories
deep in the bowels of Guangdong,
and I got the location
and when I got there, I was surprised.
- The site was evidence
of China's major domestic
manufacturing efforts underway
to skirt US sanctions.
- We all thought that this wasn't possible
because you need so much money in order
to build these chip plants.
- Estimates suggest building
a leading-edge chip plant
requires at least $30 billion in capital.
Nonetheless, in 2023,
Huawei shocked the industry
with the debut of a
China-made advanced chip
that proved an unexpectedly rapid
development and capability.
China has also become the
world's biggest producer
of analog chips,
but Chinese progress in
advanced chip making has been
stalled by fluctuating US regulation
around access to state-of-the-art
Western chips and chip technology.
ASML's highly coveted advanced
lithography machines are
among the technologies blocked from being
sold to Chinese companies.
- China's advantages, their spending
and investing a lot of money
in creating their own chips.
The Chinese government launched
a $50 billion chip fund
allowing a lot of these local chip makers
to tap into in order
to develop their chip making capabilities.
They also have all these
big private tech companies,
Alibaba, Tencent, also providing money
and support, backing a
lot of these startups.
- Money is the name of the game.
The Chinese government is
considering incentives valuing up
to an additional $70 billion
to support domestic chip making.
Meanwhile, the US is still
doling out money from the Biden
administration's $52 billion
2022 Chips Act in a major
reshoring effort of its own.
- Reshoring means bringing factories back
to a certain country so
that the physical ability
to manufacture semiconductors
resides in that country.
- In 1990, nearly 40%
of the world's chips were
manufactured in the US. In 2024,
it was only about 10%.
So the US has ambitions to send
that percentage climbing again.
- The United States has
never been the cheapest place
to produce semiconductor components.
Our labor costs are high, our
regulatory burden, it is high,
but there is an incentive
now under the current
administration and another prior one,
which involves subsidizing the creation
of more manufacturing
here in the United States.
- About 7,000 miles from the
TSMC gigafabs in Taiwan,
there is a site or collection of sites
that have earned a name inspired
by none other than the
birthplace of chip innovation.
Welcome to the Silicon Desert.
- This place a few years
ago, it used to be desert
and in a few years we will have
a little city here of fabs.
Everything will start being
like a science fiction,
highly automated producing
thousands of wafers very soon.
- On the one hand, the
desert is good for chip fabs,
low humidity, decreased
risk of earthquakes
and floods, cheap land,
and, of course, some tax
incentives.
On the other,
the chip infrastructure has
to be built up from scratch.
To date, TSMC is committed
to investing $165 billion
in the Arizona fabs
and is scheduled to receive
$6.6 billion in direct
funding from the CHIPS Act.
As TSMC makes a splash
with its first operations on
US soil,
major expansion efforts
are also underway by the
OG American chip company.
Do you know the one? Think back
to your high school backpack.
- There's a better way for
everyone. From the company
that invented the integrated
circuit, Texas Instruments.
The better way keeps getting better.
- Everybody says, oh, the
calculator company writes.
And the reality is we do
so much more than that.
Our foundational chips are the backbone
of essentially all modern
technology as we know it.
- Okay, so the calculators are cool,
but this Texas Instrument story is about a
different equation.
- If it plugs into the wall
or has a battery, it very
likely has one TI chip in it.
We have 15 manufacturing sites globally
and these manufacturing sites
work together to provide tens
of billions of chips every
year globally to our customers.
And for perspective,
that's tens of thousands
of chips coming out of TI
globally every single minute.
- That is a whopping 100,000
customers and 80,000 products.
TI makes the kind of chips
that perform more simple
tasks like sensing temperature
to prevent overheating
or managing power as it moves
through a device, the chips
that keep our technology
safe and running smoothly.
- One of the most important
things about the industry
that you have to understand
is its volume economics.
Making a lot of chips as cheap as you can
and selling them for as much
as you can is the way towards victory.
- Some of TI's chips sell
for just a few cents each.
They're cheaper and easier
to make than today's leading advanced
and AI chips, meaning it's cost effective
to utilize lower tier
or even hand-me-down production equipment.
But the company has made
the countercurrent decision
to invest $60 billion in
advanced chip manufacturing tech.
- We're actually in the subfab.
The clean room will be just above us.
- The details all come
back to those shiny wafers.
- Maybe you can come here and
help me hold this, please?
- This is a 200 millimeter
wafer, the size used
by most analog chip companies.
This is a 300 millimeter
wafer, primarily used
for more advanced chip manufacturing.
These are TI's big bet.
- So going from 200
to 300 millimeter increases
the surface area on the wafer
by 2.3 times.
- Meaning 2.3 times the number of chips.
- So when you look here,
there's kind of a collection
of different chips
and you can see everything from, you know,
really big products here all the way
to the very small tiny ones.
Pause. Let that sink in.
Those are chips.
- Yeah, it's quite amazing, isn't it?
I think if I picked it up, you
wouldn't be able to see it.
I think it's about the
size of a pepper flake
and yeah, in fact, very glittery.
- At that scale,
2.3 times the number
of chips could mean a
competitive advantage of hundreds
of thousands more chips per wafer.
- So from this vantage
point, you can get a sense
of scale of this site.
This will be TI's
largest mega site over five
and a half million square feet.
The same square footage as two
Empire State buildings.
- Wow.
- It's a huge site, mega site.
- While TI doesn't make AI chips,
it's hoping the current
landscape propels demand
for its essential chip business.
- I think what we're seeing
in terms of the growth
and expansion of the whole
industry is a mixture.
We always have the nuts and bolts: chips,
but we also have AI
pulling along those nuts
and bolts chips too,
because you can't build a server
for a data center without
some lower end cheaper chips
that do some of the
grunt work if you like.
- I'm bloody freezing.
- Alright, get into
those warm bunny suits.
- So we're going into the
first part of the clean room
that hasn't had equipment
installed yet, is that correct?
- We're entering into
the north side of the first
of four factories here in Sherman, Texas.
This factory is 100%
automated. On the ceiling,
we will have over 15
miles of automated track.
Each one of those cars carries
material around the factory.
Bringing up a 300 millimeter
factory has the most advanced
manufacturing equipment in the world.
- Texas Instruments projects
this site will soon produce
hundreds of millions of
chips every single day.
If all of this investment
pays off in the margins,
TI will increase its lead as
the number one global supplier
of analog chips, improve advanced
manufacturing's value
for even the tiniest ones.
- A couple of decades ago,
chips in general were servicing
behind the scenes.
Today, I would say chips actually
define infrastructure.
They define communications
or people mobility
or defense or AI.
- From the chips powering our devices
to the fabs where they're made,
the industry is experiencing
pervasive change.
The demand from AI
and our ever more technologically
dependent world is forcing
a global rethink of the
fundamental building blocks.
But one thing is for certain:
innovation is underway.
- We might be looking at the news
and seeing politics take center stage
or other disruptions, be
aware that companies are going
to be focused on investing
in the new product,
in the new design, in
how to save on costs.
They're going to be
focused on innovation if
they're doing things correctly.
- For years, this industry
was mired in this win
or loss brutal economics
trudged towards the future.
And now we're seeing
all kinds of excitement
of people talking about
chips in a new way.
- Plain and simple, the
chip industry is evolving
to meet the moment and it's,
- Am I allowed to say the word sexy?
- Why yes. You absolutely are.

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