Semiconductor Supply Chains in 2025: Have We Moved Past the Shortage Era?

Key Points

• Research suggests the semiconductor industry has made progress in stabilizing supply chains, but it hasn't fully moved past the shortage era, with potential new shortages looming.
• It seems likely that growth in AI and high-performance computing is driving demand, yet geopolitical tensions and natural disasters pose ongoing risks.
• Increased investments by companies like TSMC and Intel to enhance resilience, though challenges like fab delays and material restrictions persist.

Stabilization Amid Supply Chain Concerns

By March 2025, the semiconductor industry is showing signs of recovery, with chip sales expected to surge. Market research firm IDC predicts a 15% growth rate in 2025, largely fueled by advancements in AI and HPC chips driven by AI applications that rely on advanced chips to power everything from machine learning models to cloud infrastructure.

However, supply chain vulnerabilities persist. While the worst of the chip shortage crisis may be behind us, marked by widespread disruptions in 2021 and 2022, but new disruptions loom, particularly in mature-node technologies essential for industrial and automotive applications, which are not being expanded at the same pace as AI-focused production, leading to bottlenecks.

Geopolitical tensions further complicate recovery efforts. U.S. export controls on semiconductor materials and technology—particularly restrictions on China—have created supply constraints. Meanwhile, China has imposed export bans on key materials like gallium and germanium, disrupting global production.

Investment in Resilience

The United States is aggressively investing in domestic semiconductor manufacturing under the CHIPS Act, a $52 billion initiative designed to reduce reliance on foreign supply chains. Major commitments include:

• TSMC constructing a $40 billion plant in Arizona, set to produce advanced 3nm chips by 2026.
• Intel investing $20 billion in two new factories in Ohio to boost domestic production.
• Micron committing $100 billion over two decades for a memory chip facility in New York.

Persistent Risk

Supply chain risks persist, with analysts warning of potential shortages in mature nodes by late 2025 or 2026. S&P Global Mobility has pointed out that while investments are being made, they may not fully offset looming supply constraints. Natural disasters also continue to disrupt production; for instance, Hurricane Helene in 2024 significantly impacted quartz mines, a critical material in semiconductor manufacturing.

Additionally, geopolitical factors are adding another layer of uncertainty. The U.S.-China trade conflict remains a major issue, with export bans on key materials like gallium and germanium from China posing challenges for semiconductor manufacturers. These restrictions could impact the production of advanced chips, adding further strain to the global supply chain.

What’s Ahead?

The semiconductor industry is making progress toward supply chain stability, but the shortage era is not fully behind us. Persistent risks remain especially in mature nodes, geopolitical conflicts, and climate-related disruptions.

For procurement professionals, AI-driven sourcing tools, multi-source strategies, and long-term supplier relationships will be essential in navigating these challenges.

As investments continue and new technologies emerge, the coming years will determine whether the industry can fully overcome its past vulnerabilities and achieve a more resilient, diversified, and secure supply chain.