Despite geopolitical tensions, Taiwan's world-leading semiconductor fabs are completely dependent on specialty gases imported from mainland China. An export restriction on a single chemical, like NF3, could shut down the entire Taiwanese chip industry, an often-overlooked vulnerability.

TSMC's new Arizona factory can produce NVIDIA's advanced chips, but this doesn't solve US supply chain dependency. The chips must still be shipped back to Taiwan for the critical advanced packaging stage, meaning the primary bottleneck remains firmly in Asia despite onshoring manufacturing.

It's a common error to conflate the CHIPS Act and the October 2022 chip controls. The CHIPS Act was a legislative effort for domestic manufacturing resilience. The executive export controls were a separate national security policy focused on denying China access to high-end compute for military applications.

Even as the CHIPS Act brings leading-edge manufacturing to the US, a key vulnerability remains: the chips must be sent back to Taiwan for advanced packaging. This process, essential for high-performance computing, leaves the supply chain exposed.

Over 90% of the world's sulfur is a byproduct of oil refining. This sulfur is crucial for producing sulfuric acid, a key chemical in semiconductor manufacturing. Therefore, disruptions to oil shipping or refining create a hidden material supply chain risk for the tech industry, beyond just energy costs for power.

A "plugging holes" approach focused solely on raw materials is strategically flawed. China is replicating its dominance in downstream sectors like battery cells and chemicals—the "connective tissue" of manufacturing. Without a holistic strategy, the West risks solving one dependency only to face another, more complex one.

The CHIPS Act deliberately de-emphasized funding for critical materials. This was a pragmatic choice driven by tax law: material processing projects don't qualify for the 25% investment tax credit that fabs get. Covering this gap with direct grants would have been too costly for the program's limited budget.

Semiconductor fabs are prevented from stockpiling many critical, hazardous gases by strict on-site storage permits. This creates a reliance on a just-in-time, hyper-reliable supply chain, making any disruption an immediate and existential threat to production.

China's 'Big Fund' was managed regionally, sparking competition between provinces to build their own chemical supply chains for materials like NF3. This parallel development, driven by local ambition rather than central planning, resulted in massive overcapacity that is now reshaping the global market.