Introduction
They are present throughout our daily lives, they are essential components in most of our everyday electronic devices: smartphones, computers, automobiles, smart home appliances, and medical equipment. Their function is to process information and control functions, making communication, entertainment, transportation and modern medical care possible. But as their constant and progressive demand and production costs and capacities increase, production shortages are on the rise worldwide. To name a few examples, a modern smartphone typically has 20 to 50 main chips, although counting sensors and other components it could reach 100-150. A personal computer has between 50 and 200 chips, and an automobile has 1,000 to 3,000 chips. Hence the global dispute to control its market.
The recent announcement by Taiwan Semiconductor Manufacturing Company TSMC to invest more than 100 billion dollars in the United States (David Shepardson and Steve Holland, Reuters, 2025) for the construction of five new semiconductor factories on US soil and the reversal of government programs promoted by Biden to promote the industry (Oma Seddiq and Mackenzie Hawkins, Business Standard, 2025) have sparked hypotheses as to what lies behind these announcements. It is striking that the Taiwanese company is once again betting on the North American territory, especially considering that a few years ago, it had had a contrary reception (Juan Carlos López, Xataka, 2023). Basically, the U.S. labor culture was not prepared for this type of manufacturing industry. U.S. labor costs are much higher and the productivity of U.S. workers in this sector was not sufficient to justify such investments.
The Taiwanese company TSMC concentrates 54% of the world's semiconductor chip production mainly in the country of Taiwan, the highlights a special technology in cutting known as extreme ultraviolet (EUV) lithography, which allows it to manufacture smaller and more efficient chips than the competition.(See more in Rupert Wingfield-Hayes, BBC, 2023).
However, TSMC's leadership faces new challenges, as Apple, the industry's largest consumer in recent years, is now bidding to become a producer as well. Recently, the company announced an investment of more than $500 billion in the U.S. to strengthen its presence in semiconductor manufacturing (Apple will spend more than $500 billion in the U.S. over the next four years, Apple, 2025).
Speculation of a possible U.S. conflict with China, allying with Taiwan, and Trump's gesture to Ukraine to be on good terms with Putin, makes us wonder what role the production of this product plays in our time and why it is so important. With all the demands and advantages of semiconductor chip production today, countries are looking to develop their own manufacturing to reduce dependence.
What is a chip made of?
To put into perspective, given the current demand for semiconductor chips, there is a shortage of production. To name a few examples, a modern smartphone typically has 20 to 50 main chips, although counting sensors and other components it could be as many as 100-150.
A personal computer has 50-200 chips, and an automobile has 1,000-3,000 chips.
For the growing use of Artificial Intelligence, the dedicated semiconductor market for AI is expected to grow at a compound annual growth rate (CAGR) of approximately 30% between 2025 and 2027, reaching a market of approximately $35.9 billion by 2027 (for the AI segment alone). The main industries driving demand are i) automotive for autonomous driving systems, ii) healthcare in diagnostics and data analytics, iii) finance for predictive analytics and fraud detection, iv) Information Technology, v) military in an essential use of military and civilian strategic control.
Regarding its composition, a chip or microchip is a set of electronic circuits in a small portion of silicon. Silicon is an abundant chemical element present in sand. As a semiconductor, silicon has an intermediate electrical conductivity, falling between metals such as copper and insulating materials such as glass (What is a computer chip, Amazon Web Service).
Silicon can be modified by combining it with other materials, creating "keys" known as transistors. These transistors function as small electrical transmitters that can turn on [= 1] or off [= 0] the electric current (The basics of microchips - Everything you need to know about microchips - the foundation of the digital world). Thanks to this property, microchips become the basis of digital processing, enabling the execution of calculations and data transmission.
In the process of creation, monocrystalline silicon ingots are extracted by melting and refining sand. These ingots have a purity of close to 100%. The ingots are cut into wafers, from which the chips are fabricated and then cleaned, polished and coated with a layer of silicon dioxide. An additional layer of photoresist chemicals is then added on top of the wafers to improve light sensitivity. Utmost concerns need to be taken to ensure that there is no contamination from dust or other foreign substances during the execution of this process. Once the silicon chips are ready, electronic circuits are etched into them by introducing materials that form microscopic patterns.
How is the industry composed?
In recent years, the industry has tripled its market value with an upward trend that only seems to be growing (Graph 1).
Graph 1
Source: World Semiconductor Trade Statistics: World Semiconductor Trade Statistics
According to McKinsey studies, the value of the semiconductor market is estimated to be US$ 1 billion by the end of the decade (Ondrej Burkacky, Julia Dragon, and Nikolaus Lehmann, McKinsey & Company 2022).
The main producers in the market are TSMC, Intel, and Samsung. As previously mentioned, the Taiwanese company TSMC leads this industry with a market share of approximately 54%. The U.S. company Intel and South Korea's Samsung follow a long way behind with a share each in the range of 12-15%. Behind them, both with a 7% share, are Taiwan's UMC and the U.S. company GlobalFoundries, and close on their heels is the Chinese company SMIC, with a market share of approximately 5%.
Currently, chip production is concentrated in three companies that dominate manufacturing, namely TSMC, Samsung and Intel. It is important to note that the latter two are mainly dedicated to supplying the demand for their own products, which leaves TSMC with the largest share of chip orders in the world; some of its customers are Apple, NVIDIA, Microsoft and Qualcomm, as well as all the major network equipment manufacturers: Cisco, Nokia and Ericsson, among others.
Although it is not the leading producer, Nvidia is the most valuable company in the market. This is because it not only produces chips but also markets GPU products for AI and data centers, as well as hardware (Figure 2).
Figure 2
Notes: Values in billions of USD (B); Revenue and net profit are for the last twelve months (TTM); Cumulative total return over the last year.
Source: Daniel Liberto, 10 Biggest Semiconductor Companies, Investopedia, 2024.
The main regulatory contexts
In August 2022, the U.S. passed the CHIPS and Science Act, which provides about $280 billion in new funding for domestic semiconductor research and manufacturing, $39 billion in manufacturing grants, and 25% tax credits for construction. It also includes a provision that prohibits expanding capacity in "countries deemed risky" (such as China), and limits collaboration with companies in those countries.
In May 2023, the UK government announced plans to offer chip companies up to £1 billion ($1.21 billion).
In July 2023, the European Union passed its Chips Act, which aims to double the EU's global market share from at least 10% to 20% by 2030 through investments estimated at €43 billion ($45.3 billion). This plan includes investments in next-generation technologies and access to design tools and pilot lines for advanced chip prototyping and testing.
In addition, the Chips Act proposes a more investor-friendly framework, facilitating the creation of manufacturing facilities in Europe and supporting start-ups, scale-ups and SMEs in accessing finance. The initiative seeks to foster skills and innovation in microelectronics, and establish international partnerships with like-minded countries to anticipate and respond to the semiconductor supply crisis, thus ensuring a sustainable and competitive future for the industry in the region.
In August 2024, the Brazilian Senate approved the "Brazil Semiconductor Program" (PL 13/2024) that seeks to boost domestic production through increased investments in R&D, infrastructure modernization and a simplification of the regulatory framework. Extending tax incentives (Padis) until 2073 and streamlining procedures. Currently, Brazilian semiconductor companies generate around US$86 million and directly employ 2,500 people, focusing mainly on the domestic market. Brazil is expected to significantly increase these figures, boosting exports and positioning Brazil as a preferred supplier, particularly in stages such as chip encapsulation and testing. The success of the program will depend on the rapid and efficient implementation , over the next six months.
Sources: Lenore Elle Hawkins, Global Chip Race: Everything Investors Need to Know, Nasdaq, 2023; Justin Badlam, Stephen Clark, Suhrid Gajendragadkar, Adi Kumar, Sara O'Rourke, Dale Swartz, The CHIPS and Science Act: Here's what's in it, McKinsey & company, 2023; The European Chips Act ; Senate Approves Brazil Semiconductors Program.
What is happening in the Latam region with semiconductor chip production?
The semiconductor industry in the region is complex given the very high barriers to entry into this market. The investment required to compete in the global market is very high, as evidenced by Intel's investment in Israel: a capital injection of US$25 billion, complemented by generous government incentives of US$3.2 billion (Doloresz Katanich, Euronews, 2023). Moreover, we could say that "we are already late" to enter the market. This reality places Argentina and the region in a structurally disadvantageous position, with insufficient productive capacity to compete in the mass production of cutting-edge chips. Another disadvantageous factor is that our geographical location imposes a significant logistical disadvantage, as it makes it difficult to efficiently supply the main consumption centers of the United States, Europe, China and Japan.
However, the growing atomization of the global supply chain, exacerbated by geopolitical tensions and trade disputes, creates niches of opportunity, albeit limited, for the region. The voracious demand for semiconductors, particularly in strategic sectors such as cybersecurity, data protection and industrial automation, provides a glimpse of the possibility of developing a regional supply capacity. This strategy, however, is not based on head-on competition with Asian or U.S. giants in large-scale production, but on a more pragmatic approach. It involves focusing on specialization in the manufacturing of specific components, the assembly and test stages, and the development of complementary technologies. As Shih Chin-tay, founder of TSMC, said, "The number one rule at TSMC is not to compete with your customers" (Rupert Wingfield-Hayes, BBC, 2023).
To capitalize on these opportunities, a comprehensive and articulated strategy is required. This implies, imperatively, the formation of highly specialized human capital -a resource currently scarce in the region-; the implementation of attractive public policies and government incentives to attract foreign direct investment (FDI); and synergy between the public sector, the private sector, academic institutions and research centers. The creation of dynamic technological ecosystems and the active promotion of innovation are indispensable catalysts to drive this development.
Brazil, for its part, is driving an ambitious initiative to become South America's leading exporter of semiconductor chips. Zilia Technologies will lead this effort with an investment of approximately US$126 million (US$92 million for production expansion and US$34 million for R&D), seeking to launch new memory and solid state disks.
The decision to re-establish Ceitec, the public semiconductor company, and the launch of the Brazil Semiconductor Program, with economic incentives, reflect Brazil's strategic bet on this sector. The government seeks to position the country in the international market, including exploring partnerships with the United States and keeping the door open to collaboration with China. This interest is based on the strategic importance of semiconductors for various industries and the recent global shortage as mentioned (Nicolás Retamar, UNQ Science News Agency, 2023).
The growing geopolitical tension and the booming semiconductor industry are redefining the opportunities for Argentina and the entire region. Although the development of semiconductors dates back to 1947 with the invention of the transistor, their impact has intensified significantly since the 1980s. In this new global context, semiconductors have emerged as a crucial resource, the relevance of which is amplified by current geopolitical conflicts. The combination of a proactive preparation and an adequate strategy will be fundamental for Argentina and the region to achieve a successful insertion in this sector, which is vital for the economies of the 21st century.
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