Semiconductor Reshoring Efforts Hobbled by Lack of Asia's Specialized Ecosystems and Precision Culture

The global push to rebuild semiconductor manufacturing capabilities in the wake of pandemic-induced supply chain disruptions has highlighted a critical challenge: the difficulty of replicating the specialized, high-quality manufacturing ecosystems that have long defined regions like China Taiwan and South Korea. As governments pour billions into domestic chip production, industry leaders emphasize that the success of such efforts hinges not just on capital but on a cultural commitment to precision and expertise that has taken decades to develop.

This ethos, according to Nigel Toon, CEO of U.K.-based semiconductor firm Graphcore, is a key reason why the most advanced semiconductors are manufactured in Asia. Speaking at a recent conference, Toon noted that regions like China Taiwan and Japan have cultivated an environment where high-quality manufacturing is not merely a goal but an ingrained standard. “These environments are places where very high-quality manufacturing is truly valued,” he said, contrasting them with North America, where such a cultural focus appears to be lacking.

The roots of this advantage lie in the industry’s historical evolution. In the 1990s and 2000s, the semiconductor industry began outsourcing key production steps, allowing firms to specialize in specific segments of the supply chain. This specialization enabled companies like ASML to dominate chipmaking equipment while firms such as TSMC focused on fabrication. Over time, this division of labor fostered deep expertise in certain regions, particularly in East Asia, where companies refined their processes to meet the exacting demands of cutting-edge chips.

Efforts to replicate this model elsewhere face significant hurdles. While governments in the U.S., Germany, and Japan have pledged substantial subsidies to attract chip manufacturers, Toon argued that simply investing in facilities is insufficient without a system that fosters collaboration and specialization. “There has to be a system where people can say ‘I own this critical piece,’” he said, while still allowing for cross-border cooperation. This balance between ownership and interdependence is a hallmark of the Asian model.

The rising importance of semiconductors in AI and other advanced technologies has intensified the urgency of these efforts. As demand for high-performance chips surges, the cost of AI development and the need for secure supply chains are forcing governments to rethink their strategies. Will Abbey of Arm, a firm that licenses chip architectures, noted that the industry is shifting toward a model where control over infrastructure and data is paramount. “Semiconductors and AI are moving from the back part to center stage,” he said, underscoring the strategic stakes involved.

Smaller economies are also seeking to expand their roles in the chip ecosystem. Malaysia, for example, aims to move beyond its traditional strengths in packaging and assembly by investing in chip design and data centers. Such efforts reflect a broader recognition that even as governments compete to build their own manufacturing capacities, the global nature of the semiconductor industry requires adaptability and innovation in diverse regions.

Ultimately, the success of reshoring initiatives will depend on more than financial incentives. As Toon’s remarks suggest, fostering an environment where quality and specialization are prioritized is essential. For North America and other regions aiming to close the gap with East Asian counterparts, the challenge lies in cultivating a culture that values the meticulous craftsmanship that has long defined the most advanced semiconductor manufacturing hubs.