AI Drives Global Shift in Semiconductor Supply Chains: DIGITIMES

The semiconductor and electronics industries are undergoing a profound transformation driven by AI, shifting market power and driving a global supply chain realignment, according to DIGITIMES.

The rise of generative AI has dramatically altered the global technology landscape, says Eric Huang, Vice President, DIGITIMES. In 2018, five of the world’s ten most valuable companies were technology firms. By mid-2025, that number had grown to nine, including semiconductor leaders Nvidia, Broadcom, and TSMC, alongside tech giants Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla. All of these companies integrate semiconductors at the core of their businesses.

Taiwan and China’s Manufacturing Shifts

Huang highlights a major shift in the balance of power between Taiwan and China in contract manufacturing. In 2018, Taiwanese firms accounted for 78% of revenue among top original design manufacturers (ODMs) and electronics manufacturing services (EMS), while China held just 6.4%. By 2024, Taiwan’s share fell to 65% as China surged to 22%, driven by consumer electronics demand.

By early 2025, however, Taiwan regained ground, climbing back to 70% market share as demand for AI servers from hyperscalers and Nvidia reshaped the market.

Fabless companies have also gained strength. Nvidia’s semiconductor revenue reached US$72 billion in 2024, giving it a 12% global share. TSMC remains the largest semiconductor company worldwide, holding 55% of the foundry market.

Chinese players, including SMIC and Huahong, continue to expand with compound annual growth rates of 17.6% and 12.3%, respectively. However, they still trail significantly in advanced logic processes compared to Taiwan and other global leaders.

While global server EMS production is expanding in the United States, Asia remains the backbone of the AI server supply chain, says Yen Chou, Analyst, DIGITIMES. Taiwanese firms including Foxconn, Quanta, Wistron, Inventec, and Mitac have opened facilities in Texas, California, and Tennessee. Yet, these plants continue to depend heavily on components sourced from Taiwan, China, Malaysia, and Vietnam.

Critical assembly processes for Nvidia’s H200 GPUs remain centered in Taiwan. Despite new facilities in Arizona and advanced packaging projects in the US, packaging capacity will not be available until at least 2027, forcing GPUs to be shipped back to Taiwan for final processing. This dynamic will sustain the US trade deficit with Taiwan in the near term, writes DIGITIMES.

Chinese suppliers also remain embedded in US supply chains, particularly in printed circuit boards, casings, and mechanical components. US imports from China and Vietnam surged earlier this year following new tariffs on steel and aluminum. More recently, exports of mechanical parts from Vietnam and Malaysia to the United States have increased, though it remains uncertain if this represents a long-term trend.