Change happens fast in the electronics supply chain, and after years of supply uncertainty following the COVID-19 pandemic, combined with increasing conflict around the world and a series of pivotal elections in 2024, it seems there’s only one thing to expect from 2025 and that’s more volatility.

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With current conflicts around the world and new trade tensions at play, each prompting new potential semiconductor supply choke points, we take a look at five geopolitical hotspots to keep a close eye on in the months ahead. 

1. Russia’s war in Ukraine

Although it no longer makes the headlines on a daily basis, sadly, Russia’s invasion of Ukraine continues. With vast reserves of minerals, Ukraine is an important source of raw materials for the semiconductor industry, as well as being one of the key suppliers of neon, which is an essential part of the semiconductor manufacturing process. 

Strategic stockpiling at the start of the war helped stabilize some of the initial effects of these shortages, but with resolution still uncertain, the possibility for disruption continues. Ukraine was home to two companies that together produced around 50% of the world’s semiconductor-grade neon, but with their closure, component manufacturers were forced to seek a variety of workarounds. Notably, for example, in April 2024, when SK Hynix and Samsung implemented innovative recycling technologies to reduce their dependence on conventional sources of neon. 

Two years on from the start of the war, and it’s apparent that the resulting supply challenges did not bring the semiconductor industry to a halt, but Russia’s aggression toward Ukraine has caused disruption and, as a result, highlighted parallels with China’s stance toward Taiwan. 

2. China-Taiwan tension

China claims sovereignty over Taiwan and aims for reunification, while Taiwan sees itself as separate from mainland China. This has caused ongoing tensions to bubble up, with China’s increased military activity in the region over the course of 2024 raising fears of a potential conflict.

Naturally, this brings TSMC into the spotlight. According to IDC’s latest Worldwide Semiconductor Technology Supply Chain Intelligence report, TSMC’s market share is projected to climb steadily from 59% in 2023 to 64% in 2024 and 66% in 2025, far outpacing competitors such as Samsung, SMIC, and UMC.

Any disruption to TSMC, or indeed to Taiwan’s semiconductor supply chain across the region, would cause component shortages and increased costs worldwide and the technology gap left by restricted TSMC supply would take many years to fill. As a result, companies and governments are looking at ways to diversify the semiconductor supply chain beyond Taiwan, with many in the West now introducing more protectionist industrial policies.

3. US-China trade war

Thanks to the US government’s Chips and Science Act, work is underway to build several new semiconductor fabs in the US. The policy, which is intended to reduce US reliance on overseas chip-makers, is expected to ensure a reliable supply of advanced components. TSMC, for example, is currently planning its third leading-edge fab in Phoenix, Arizona, which will bring TSMC’s total investment in the region to over $65 billion.

Although TSMC Arizona’s first fab is on track to begin production leveraging 4nm technology in the first half of 2025, the Chips Act is a long-term investment. In the short-term, however, December saw another of Biden’s measures to fight back against Chinese ambition.

The latest restrictions include curbs on China-bound shipments of high-bandwidth memory (HBM), a critical component in AI applications, as well as 24 different chipmaking tools, three software tools, and new export rules on chipmaking equipment manufacturers in countries such as Singapore and Malaysia.

China meanwhile continues to expand its portfolio of mature process nodes, including ARM-based MCUs and analog ICs, to support home and export markets, but with Trump expected to raise tariffs on Chinese imports to the US to 60%, it looks like trade tensions with China are set to reach new highs, potentially resulting in severe disruption to electronic component supply.

4. Middle East turmoil

War in the Middle East provides more to think about, potentially exposing further vulnerabilities in the electronics supply chain. At present, the Israeli-Gaza conflict continues undiminished, sapping Israel’s efforts in semiconductor production. 

At first glance, you might not think that would make a significant impact, but with over 30,000 chip engineers and nearly 200 semiconductor companies, Israel represents approximately 8% of the world’s chip design talent. This concentration makes the semiconductor industry highly sensitive to conflicts affecting the region. 

With turmoil in this part of the world, the prospect of a potential conflict between Israel and Iran also increases. This too could have far reaching effects for the global semiconductor industry as both countries play key roles. In addition to Israel’s chip design expertise, we should also look to Iran’s control of the Strait of Hormuz. This is a critical chokepoint which could disrupt the supply of both components and oil, with the latter also increasing energy prices for the tech industry. 

Factor in the engagement of global powers like the USA, China and Russia and the potential consequences are multiplied, causing lasting volatility for tech industries.

5. South Korean political unrest

Finally, if the points above didn’t convince you that it’s time to make some changes to your sourcing strategy, perhaps recent events in South Korea will. December 2024 saw sudden political upheaval when South Korea’s President Yoon Suk Yeol briefly declared a state of martial law. The declaration, although quickly overturned, raised fears for South Korea’s role as a global technology hub.

All of which is unsurprising when you realize that the country accounts for 60.5% of the global memory semiconductor market and has a DRAM market share of 70.5% and a NAND market share of 52.6%. If nothing else, it highlights the fragility of the network on which we have come to rely, providing food for thought for electronics sourcing professionals around the world.

2025 and beyond

If you’re wondering how to safeguard your BOM and protect against component shortages in the wake of all this volatility, it’s a good idea to start by accepting that things have changed. As the World Economic Forum points out: the golden age of trade appears to be at an end. Geopolitical tensions will most likely continue to threaten stability, making supply chain diversification a critical element in managing potential shortage risks. 

If you’d like to learn how AERI can help you navigate these challenges, resolve supply issues, and keep your production lines moving, contact our sourcing experts at www.aeri.com.