The global chip supply chain: how it works, where it is strained and why

1 The short version

• Chip availability depends on a sequence of specialist jobs, not on a processor alone. Our interpretation: the slowest required step can constrain the whole system.

• Demand indicators and projections describe different things. A completed sales period is not a forecast of future capacity. The latest WSTS calculation must not be described as a new forecast.

  Estimate WSTS updated calculation with actual Q2 data: 2026 at $1,655B (about +108%, 18 percentage points above the original spring estimate), 2027 at about $2.1T (+29%); WSTS states these are not new forecasts ^[3]

  2026-2027 · Primary · WSTS Q2 2026 release ^[3]

• Revenue concentration is a useful starting point, but it is not a map of every factory or a measure of productive capacity.

  Reported Q2 2026 foundryA business that manufactures chips to customer designs. revenue shares (TrendForce): TSMC 72.5% (Q1: 72.3%), Samsung 5.9% (6.5%), SMIC 5.4% (5.1%), UMC 3.9%, GlobalFoundries 3.2%; top-10 foundryA business that manufactures chips to customer designs. revenue about $53.49B (+11.5% quarter on quarter); the top 10 hold 96.5% ^[10]

  Q2 2026 · Secondary · TrendForce as reported by Taipei Times and ANI ^[10]

• Advanced packaging and HBMHigh-bandwidth memory, stacked close to a processor to supply data quickly. memory connect manufacturing to usable computing. Estimates vary, and planned expansion is not the same as delivered output.

  Estimate CoWoSChip-on-Wafer-on-Substrate, the advanced packaging approach discussed in this report.: supply-demand gap seen narrowing from about 20% to about 10% by end-2026; TSMC monthly CoWoSChip-on-Wafer-on-Substrate, the advanced packaging approach discussed in this report. capacity could reach 120,000-140,000 wafers in 2026, plus 50,000-60,000 at partners, so industry capacity could approach 200,000 per month; TrendForce expects the 2.5D packaging shortage to begin moderating by 2027 as TSMC plans more than 60% expansion by 2027 ^[17]

  2026-2027 · Secondary · TrendForce News, 15 Jun 2026 ^[17]

  Reported Only three companies produce HBMHigh-bandwidth memory, stacked close to a processor to supply data quickly. at commercial scale: SK hynix, Samsung and Micron ^[20]

  2026 · Secondary · Silicon Analysts ^[20]

• Materials exposure can sit upstream of a direct purchase. A small direct sourcing share does not establish that the wider supply chain is independent of that country.

  Reported SIA report (reported 12 Oct 2026): by country of manufacture China supplies about 5% of the equipment and materials the US chip industry buys directly, but over 90% of certain rare earthsA group of elements used in specialised materials and applications.; further upstream exposure to China is not captured; galliumAn element used in specialised semiconductor materials. and tungsten given as examples; SIA recommends stockpiling priority inputs and developing alternative supply with allies; some material capacity could take a decade or more to build, followed by three to four years to qualify suppliers ^[24]

  2026 · Secondary · South China Morning Post ^[24]

• Electricity and trade belong in the same discussion as chips. Our interpretation: a delivered server is not working capacity until its supporting infrastructure is available.

  Reported / Forecast Data-centre electricity demand rose 17% in 2025 versus 3% for overall global demand; IEA expects it to double by 2030, AI-specific demand potentially tripling; the five largest tech companies' capex expected to rise a further 75% in 2026 ^[8]

  2025-2030 · Secondary · IEA "Key Questions on Energy and AI" (Apr 2026) as reported by Investment Monitor ^[8]

2 How a chip is made: six steps

Our interpretation: every stage is a specialist job. A system becomes available only when its required stages are ready together. This is a way to understand dependencies, not a measured ranking of suppliers or a claim that every chip follows an identical production route.

The chain below separates design, equipment and materials, manufacturing, memory, packaging and test, and the finished system. The company names are examples already covered by this publication. They are not a complete supplier list, nor evidence that any particular customer uses every named supplier.

Our interpretation: separating these tasks makes it easier to ask a precise question. Is a delay caused by the design, the tool, a production process, memory availability, packaging or the place where the system will operate? A general statement that chips are scarce leaves that distinction unresolved.

3 Where it all sits: the map

The map is a country-level guide to the evidence in this report. It does not identify factory addresses or show a complete inventory of semiconductor production. The markers distinguish manufacturing, memory, equipment, design and demand, and materials and policy.

Reported evidence in the country panels has different boundaries. A foundryA business that manufactures chips to customer designs. revenue share describes sales, not all manufacturing capacity. A headquarters-based industry share describes the location of companies, not the place where their chips are made. A material sourcing share uses another measurement again.

Our interpretation: these distinctions matter because a single geographic label can conceal several dependencies. Read the marker together with its period, source type and caveats. Japan and other important suppliers of materials and equipment are not yet covered here.

4 Why the strain is happening now

The supplied demand evidence describes a sharp expansion in semiconductor sales and AI infrastructure spending. It also contains projections that have moved as new results became available. Those are different categories of evidence and should not be joined into a single uninterrupted growth path.

The monthly industry figure uses a moving average rather than a simple reading of sales in that month alone. The half-year result supplies another view of completed activity.

Reported: WSTS distinguishes its updated calculation using actual quarterly data from a new forecast. Its earlier spring outlook remains a forecast made with the information available at that time. Neither should silently replace the other in a historical comparison.

The rack evidence concerns the composition of a system. The data-centre estimate concerns investment in infrastructure. Neither is a direct count of available leading-edge manufacturing slots.

A company result provides a further indicator of the demand reaching suppliers. It is not, by itself, evidence that customers have completed their installations or earned a return on them.

Our interpretation: demand can change faster than the manufacturing and infrastructure commitments required to serve it. Large investment announcements do not prove that the relevant equipment, packaging, memory and electricity are available together. This report therefore follows individual constraints rather than extrapolating the broad sales figures.

5 The bottlenecks, one by one

The following sections use the same questions: what is constrained, why the constraint may exist, what the supplied evidence says, who is exposed, what may change, and where the evidence stops. Reported explanations are separated from the publication’s reasoning.

Our interpretation: a bottleneck is specific to a product, process and period. A tight advanced process does not establish that every semiconductor category lacks capacity. A supplier’s revenue growth does not establish how much additional usable output has become available. The scorecard is consequently a draft assessment, not a capacity model or an investment recommendation.

5.1 Leading-edge manufacturing in one place

The problem

The supplied evidence describes strong revenue concentration in the foundryA business that manufactures chips to customer designs. market and booked advanced capacity at TSMC. FoundryA business that manufactures chips to customer designs. means manufacturing chips to customer designs. The measure shown here is foundryA business that manufactures chips to customer designs. revenue share, not a share of all chips or all factories.

Why it exists

• Reported: AI server GPU and custom processor demand kept the named advanced processes fully booked in the covered quarter.

  Reported TSMC's 5nm/4nm and 3nm capacity was fully booked in Q2 2026 on AI server GPU and custom processor demand; its 2nm process contributed revenue for the first time ^[12]

  Q2 2026 · Secondary · TrendForce as reported by EE Herald ^[12]

• Our interpretation: leading-edge production requires large, long-lead commitments. Customers can concentrate where process capability and a production track record already exist.

• Our interpretation: concentration can make an interruption harder to work around, but revenue share alone cannot quantify that risk.

The evidence

Who feels it

Our interpretation: designers waiting for manufacturing, packaging providers waiting for finished logic chips, and system builders waiting for completed modules can all feel the same upstream constraint. This describes dependency, not a forecast of any named company’s deliveries.

What is changing

The capacity report says the newer process contributed revenue. That is evidence of a production transition, not proof that every relevant customer can move immediately. Compatibility and the rest of the supply chain remain separate questions.

Outlook and caveats

There is no quantified leading-edge relief forecast in the supplied evidence. The chart’s remaining share is a calculation from the named shares, not an independently reported category. The top-ten share and the named-company shares have different boundaries; confirm the denominator before drawing broader conclusions.

5.2 Lithography

The problem

Lithography transfers a circuit pattern onto a waferA thin slice of semiconductor material on which circuits are formed.. EUV lithographyCircuit patterning using extreme ultraviolet light. uses extreme ultraviolet light for specialised patterning. The smallest features require tools designed to control that pattern very precisely. This is a plain-language process explanation, not a numerical comparison of machines.

Why it exists

• Our interpretation: printing a usable circuit requires specialised equipment and reliable operation, rather than simply a smaller drawing.

• Our interpretation: restricted access to a relevant tool can limit the production choices available to a manufacturer. It does not identify a specific output level.

The evidence

Who feels it

Our interpretation: manufacturers depend on equipment appropriate to their processes. Designers and system builders can feel the consequences later in the chain. The evidence here is insufficient to calculate the size or timing of that effect.

What is changing

The ASML outlook is the company’s forecast, not completed sales. Its reported quarter and future-year range must remain visibly separate. Neither figure is a direct measure of scanner availability for a particular factory.

Outlook and caveats

The evidence base in this section is deliberately thin. ASML is generally described as the only commercial supplier of EUV systems, but that description still needs a primary source in this report. The next useful check is the relevant ASML annual report and original results release. No equipment market share or tool-delivery forecast is supplied here.

5.3 Advanced packaging

The problem

Packaging joins the processor and memory into a working module and connects it to the wider system. Advanced packaging therefore sits between a finished logic chip and usable AI hardware. CoWoSChip-on-Wafer-on-Substrate, the advanced packaging approach discussed in this report. is the packaging approach named in the supplied capacity estimates.

Why it exists

• Reported: the supplied TrendForce reporting describes a packaging supply-demand gap and plans to expand capacity.

  Estimate CoWoSChip-on-Wafer-on-Substrate, the advanced packaging approach discussed in this report.: supply-demand gap seen narrowing from about 20% to about 10% by end-2026; TSMC monthly CoWoSChip-on-Wafer-on-Substrate, the advanced packaging approach discussed in this report. capacity could reach 120,000-140,000 wafers in 2026, plus 50,000-60,000 at partners, so industry capacity could approach 200,000 per month; TrendForce expects the 2.5D packaging shortage to begin moderating by 2027 as TSMC plans more than 60% expansion by 2027 ^[17]

  2026-2027 · Secondary · TrendForce News, 15 Jun 2026 ^[17]

• Our interpretation: a supporting step can become a constraint when demand for the completed system expands faster than that step.

• Our interpretation: manufacturing expansion in one place does not remove a packaging dependency elsewhere.

The evidence

Who feels it

Our interpretation: customers may have a logic chip available but still wait for the processor-memory module. Manufacturing and packaging readiness are therefore different milestones. This does not imply that every shipment from Arizona takes the same route.

What is changing

Estimate: the supplied sources describe expansion and possible moderation of the shortage. They do not use an identical capacity definition or endpoint. The estimates should be read as a range of published expectations, not added together as if they were separate, confirmed production volumes.

Outlook and caveats

Our interpretation: installed capacity, partner capacity and completed usable packages are not interchangeable. A wider capacity range does not establish the exact date a customer will receive a module. The source reporting should be replaced by the original underlying releases where possible. No measured packaging yield or customer allocation is supplied.

5.4 HBM memory

The problem

HBMHigh-bandwidth memory, stacked close to a processor to supply data quickly. is high-bandwidth memory: memory stacked close to a processor so that it can supply data quickly. A processor’s ability to work depends on access to its required memory. This explanation is qualitative; it does not compare performance or prescribe a memory configuration.

Why it exists

• Reported: the supplied evidence identifies a small group of commercial-scale producers.

  Reported Only three companies produce HBMHigh-bandwidth memory, stacked close to a processor to supply data quickly. at commercial scale: SK hynix, Samsung and Micron ^[20]

  2026 · Secondary · Silicon Analysts ^[20]

• Our interpretation: a concentrated supply base can leave fewer alternatives when demand changes, although producer count alone cannot measure the shortage.

• Our interpretation: a customer needs suitable memory and packaging together, not merely an available logic chip.

The evidence

Who feels it

Our interpretation: memory suppliers, module assemblers and system purchasers face related availability questions. The supplied Micron result describes its financial reporting period, not a count of HBMHigh-bandwidth memory, stacked close to a processor to supply data quickly. units or a measure of the whole memory market.

What is changing

Forecast: the supplied reporting describes higher expected prices and contracted future output. Those statements concern expectations and commitments, not completed future sales.

Outlook and caveats

Forecast: the WSTS memory outlook is broader than HBMHigh-bandwidth memory, stacked close to a processor to supply data quickly. and cannot be substituted for an HBMHigh-bandwidth memory, stacked close to a processor to supply data quickly.-only forecast. The McKinsey figures come through secondary reporting rather than an original report linked here. HBMHigh-bandwidth memory, stacked close to a processor to supply data quickly. share estimates vary widely between sources. The supplied rounded quarterly shares do not reconcile exactly to a complete market total; they are preserved without normalisation. Compare like periods and definitions before treating movement between them as a definitive change in competitive position.

5.5 Critical materials and export controls

The problem

Direct purchasing data can miss upstream material dependencies. Rare earthsA group of elements used in specialised materials and applications. are a group of elements used in specialised applications; galliumAn element used in specialised semiconductor materials. and germaniumAn element used in specialised electronic and optical materials. are other named inputs in the controls discussed here. These are not interchangeable material categories.

Why it exists

• Reported: the supplied SIA reporting says upstream exposure is not captured by the direct purchase share.

  Reported SIA report (reported 12 Oct 2026): by country of manufacture China supplies about 5% of the equipment and materials the US chip industry buys directly, but over 90% of certain rare earthsA group of elements used in specialised materials and applications.; further upstream exposure to China is not captured; galliumAn element used in specialised semiconductor materials. and tungsten given as examples; SIA recommends stockpiling priority inputs and developing alternative supply with allies; some material capacity could take a decade or more to build, followed by three to four years to qualify suppliers ^[24]

  2026 · Secondary · South China Morning Post ^[24]

• Our interpretation: replacing a direct vendor may not remove exposure if that vendor obtains an input from the same upstream source.

• Our interpretation: new supply and qualification are different steps. A proposed alternative is not necessarily ready for a customer’s process.

The evidence

Who feels it

Our interpretation: material suppliers, equipment makers and chip manufacturers can be affected through different purchasing routes. The direct sourcing figure does not identify the exposure of an individual company. It also does not quantify the amount of production at risk.

What is changing

The timeline separates licensing measures, announced packages and suspensions. A suspension of one package does not mean that every earlier measure disappeared. The supplied sources describe the measures and their stated context; this report does not assign motives beyond that reporting.

Outlook and caveats

Reported: the source set gives a scheduled end to the suspension. A scheduled expiry is not evidence of what will happen at that date. Check the current status on the day of publication. Original legal notices and the original SIA report are still needed to replace the secondary summaries. No material-price projection or quantified substitution scenario is included.

5.6 Power and the grid

The problem

Computing equipment needs an operating site with an electricity supply. The grid is the network that carries that supply. A server purchase and an available grid connection are separate milestones, even when both belong to the same infrastructure project.

Why it exists

• Reported: the supplied IEA reporting names equipment shortages, connection delays and permitting as constraints.

  Reported IEA: data-centre build-out is slowed by shortages of gas turbines, transformers and advanced chips, grid connection delays and complex permitting ^[9]

  2026 · Secondary · IEA "Key Questions on Energy and AI" (Apr 2026) as reported by Investment Monitor ^[9]

• Our interpretation: electricity infrastructure and permission to operate can move on longer timelines than server deliveries.

• Our interpretation: a chip constraint can ease while the site remains unable to use additional computing equipment.

The evidence

Who feels it

Our interpretation: site developers and computing purchasers need both equipment and the conditions to operate it. Chip suppliers may experience demand before the final installation is complete. This report does not infer customer returns from supplier revenue.

What is changing

Forecast: the IEA expectations in the supplied reporting concern future demand, not electricity already consumed. The infrastructure investment estimate has a different boundary. It should not be used as a measure of power capacity or as a guarantee that individual projects proceed.

Outlook and caveats

The report has no country-level connection queue, generating-capacity series or project completion schedule. It cannot quantify where power is the binding constraint for a particular installation. The evidence supports including electricity in the chain, not replacing a local grid assessment. Primary IEA material is a useful next sourcing step.

5.7 Geography and trade

The problem

Headquarters and manufacturing location answer different questions. A company can be counted in a headquarters-based sales measure while its chips are manufactured elsewhere. The apparent contrast between industry leadership and import demand is therefore not automatically a contradiction.

Why it exists

• Reported: the supplied SIA figures explicitly use headquarters rather than the place where chips are made.

  Reported US-headquartered companies had 53.4% of global chip sales in 2025 (about $425B), measured by headquarters not by where chips are made; US chip exports were $57.8B in 2025; more than 70% of US chip companies' revenue comes from abroad ^[28]

  2025 · Internal · SIA data, via our articles us-chip-share-53-percent and us-chip-exports-57-8b ^[28]

• Our interpretation: comparing headquarters sales with imports without explaining those definitions creates a misleading impression of a single domestic supply share.

• Our interpretation: trade value can reflect purchasing demand, but it does not establish how much productive factory capacity exists.

The evidence

Who feels it

Our interpretation: companies assembling systems and policymakers examining domestic supply need to distinguish corporate ownership, manufacturing, packaging and trade. A factory in one country does not establish that its whole upstream and downstream chain is local.

What is changing

Reported: the import comparison covers the same part of each year. It is not a full-year trade result. Forecast: the manufacturing-capacity projection comes from the older SIA/BCG report, not from a current measurement of realised capacity.

Outlook and caveats

The supplied import figures are from news reporting and still need official trade statistics. The capacity projection is historical and does not establish that announced projects have been completed. Do not combine its manufacturing share with foundryA business that manufactures chips to customer designs. revenue share or headquarters-based sales share. They measure different populations and different activities.

6 How the bottlenecks connect

Our interpretation: the diagram describes complementary requirements, not a formula that produces a numerical capacity estimate. A leading-edge logic chip, suitable HBMHigh-bandwidth memory, stacked close to a processor to supply data quickly., advanced packaging and power at the operating site must be available in the configuration a system needs.

Our interpretation: buying more of an unconstrained input cannot, by itself, compensate for a missing required input. Extra logic chips do not resolve a packaging wait. Completed modules do not resolve an unavailable grid connection. The weakest-link description is a useful analytical simplification, not a claim that all projects share one constraint.

Our interpretation: easing one bottleneck can shift attention to the next. Packaging expansion may make a memory limitation more visible. Memory availability may expose the timing of an installation. The constraint can move without making the previous investment unnecessary.

Our interpretation: this is why a chain view is more useful than a single supplier ranking. It asks which step limits a specific deployment at a specific time. The report does not assign numerical weights to these relationships or quantify how much output would follow from removing any one constraint.

7 Scorecard

Our assessment: the status column is a draft editorial assessment as of the supplied review date, not an externally measured index. Tight means the cited evidence indicates a constraint. Unclear means this source set does not support a confident direction. An expectation of easing is not a finding that the constraint has already ended.

The rows link to the evidence above and separate expected relief from the present assessment. Forecasts and estimates retain their original labels. The author must confirm the statuses before publication and date subsequent changes.

Our interpretation: the matrix is a reading aid, not a comparison of investment opportunities. Its rows have different evidence strength, geography and periods. They should not be added into a score or ranked as if they used a common quantitative scale.

8 What to watch next

• Reported schedule: check the export-control suspension at its stated expiry, and confirm the status on the publication day.

  Reported China export-control timeline (dates as in the ControlsTimeline component); the suspension of the 9 Oct 2025 package runs until 10 Nov 2026; the April 2025 controls and the older galliumAn element used in specialised semiconductor materials./germaniumAn element used in specialised electronic and optical materials. licensing remain; China introduced the controls in response to US tariffs and citing national security ^[25]

  2023-2026 · Secondary · CFR, CIRS Group, European Parliament Think Tank ^[25]

• Watch for a new WSTS release and distinguish a forecast from an updated calculation. This fact set does not confirm an autumn publication date.

  Estimate WSTS updated calculation with actual Q2 data: 2026 at $1,655B (about +108%, 18 percentage points above the original spring estimate), 2027 at about $2.1T (+29%); WSTS states these are not new forecasts ^[3]

  2026-2027 · Primary · WSTS Q2 2026 release ^[3]

• Estimate: compare actual end-period CoWoSChip-on-Wafer-on-Substrate, the advanced packaging approach discussed in this report. capacity with the different supplied expectations. Use consistent definitions for TSMC and partners.

  Estimate A different estimate: CoWoSChip-on-Wafer-on-Substrate, the advanced packaging approach discussed in this report. capacity of about 115,000-140,000 wafers per month by end-2026 and about 170,000 in 2027; estimates differ between sources ^[18]

  2026-2027 · Secondary · TrendForce News, 16 Apr 2026 ^[18]

• Forecast: monitor the potential memory relief described in the supplied McKinsey reporting; do not treat the expected timing as a commitment.

  Forecast McKinsey (29 Sep 2026): 2030 base case $2.3T (up 44% from $1.6T); 19% annual growth; chips for servers and data centres $330B (2025) to $1.2T (2030); leading-edge chips add $710B and memory $560B; waferA thin slice of semiconductor material on which circuits are formed. volume growth about 7% a year; scenario range $1.7T-$2.6T; added capacity could ease the memory shortage from around 2027, prices may stay above historical levels ^[5]

  2030 · Secondary · Bits&Chips reporting McKinsey ^[5]

• Reported series: read the next monthly SIA figure with its moving-average definition and any revisions. No publication date for that next figure is supplied.

  Reported Global chip sales were $159.7B in Aug 2026, +144.3% versus $65.4B in Aug 2025 and +8% versus July's $147.9B; monthly figures are three-month moving averages compiled by WSTS; sales for the year through August passed $1T for the first time ^[1]

  Aug 2026 · Primary · SIA release 5 Oct 2026 (interim link) ^[1]

9 What this report does not cover

Japan and other important materials and equipment suppliers are not yet covered. The country map should not be read as a comprehensive account of the industry. Chip design software, intellectual property and detailed upstream raw-material chains are outside the present scope.

Company-level financial analysis is also outside the scope. Some company results provide demand or supplier context, but they are not a valuation model. No investment-return estimate is implied.

Several sources are secondary, and some internal references point to earlier coverage rather than an original document. Published figures can be revised, and forecasts can change. The review notes retain the unresolved sourcing issues for the editor.

Our interpretation: a limited evidence set is useful only when its limits stay visible. Absence from this report does not establish that a country, company or process is unimportant. The report describes the supplied evidence and its caveats, not an independently audited inventory of global capacity.