Chip reshoring limits and AI power IC shortages strain supply

As governments globally push for rapid reshoring of chip manufacturing, capacity constraints and workforce limitations are proving difficult to unwind. Nowhere is this more evident than the tug-of-war between the U.S. and Taiwan as the former seeks to relocate 40% of chip manufacturing stateside. Simultaneously, AI workloads are driving unprecedented demand for power management components, tightening supply and pushing prices higher.  

Taken together, these developments are a reminder of the interconnected stress points pushing on the electronic components supply chain and the need for a coordinated sourcing strategy to weather the storm.  

Taiwan pushes back on large-scale US chip reshoring

The benefits of bringing chip production closer to home are evident, especially in today’s hectic global economy. However, not everyone is keen on helping restore the U.S. to powerhouse status.  

Earlier this month, Taiwanese officials made a pointed statement pushing back against U.S. desires to move 40% of the island’s chip capacity stateside.  

Taiwan Vice Premier Cheng Li-chiun said in an interview, “I have made it very clear to the United States that this is impossible… Our international expansion, including increased investment in the United States, is based on the premise that we remain firmly rooted in Taiwan and continue to expand investment at home.”  

While political leaders in Washington continue to frame reshoring as a question of willpower and economic incentives, Cheng’s statement reaffirms Taiwan’s stance that such a transition is impractical, if not implausible.  

The unique density and integration of the semiconductor sector in Taiwan is part of what makes reshoring to the U.S. so difficult. Advanced nodes demand cutting-edge fabs, but also rely on thousands of interlinked suppliers, toolmakers, vendors, and specialized engineering teams. Attempting to replicate this ecosystem in North America isn’t as simple as investing billions in new foundries.  

In the coming years, the U.S. will contend with numerous challenges, including a small skilled labor pool, limited local input acquisition, and long ramp-up periods. Even with the backing of the CHIPS Act and billions of dollars in other incentives, fast-tracking domestic production isn’t as swift as the name suggests.  

Meanwhile, Taiwan isn’t excited at the prospect of abandoning the decades of hard-earned operational maturity that have made it the world’s chip capital. The U.S. has used tariffs as its primary lever to affect that decision, threatening duties of up to 100% if nearly half of the island’s chip production isn’t moved to the states. Whether the threat of painful export taxes is enough to force Taiwan’s hand is yet to be seen.  

In the meantime, Taiwan has already committed to a massive series of investments in American chipmaking.  

TSMC’s $165 billion pledge to build factories in Arizona is the cornerstone. Reuters reports that Cheng has also stated Taiwan is “willing to share its experience in building an industry cluster and help the U.S. develop a similar environment.”  

For global procurement leaders, Taiwan’s recent pushback is a prudent reminder of what remains realistically achievable in the mid-term. While long-term reshoring can and will play a role in risk diversification, it cannot offset the need for reliable access to Taiwan-based capacity right now.  

Rather than waiting for reshoring to solve supply chain risks, forward-looking organizations are investing in dynamic sourcing models that match the present-day realities of the semiconductor ecosystem. Sourceability helps customers maintain access to global supply through our wide network of vetted global suppliers, offering continuity even when chokepoints disrupt other avenues.

AI-driven power IC tightness pushes prices higher

The explosion of AI demand continues to stress the supply chain, resulting in higher prices for key power IC categories. Industry heavyweight Infineon recently announced a new round of increases for certain products in its power management portfolio starting in April 2026.  

AI models, particularly those deployed in hyperscale environments, require dense clusters of high-performance processors and memory. However, the ultimate performance of those accelerators is gated by how efficiently they can be powered and cooled.  

Thanks to their critical role, components including MOSFETs, IGBTs, and related ICs are seeing heightened demand as major players ramp up their AI deployments. Over the past year, this has created a tightening bottleneck, leaving the industry to grapple with component shortages and soaring prices.  

Troublingly, TrendForce notes that capacity expansion in the critical power IC segment is lagging behind demand. Building new capacity involves long lead times, and much of the existing infrastructure is already committed to legacy applications in industrial, automotive, and telecom markets.  

Unlike in memory, AI isn’t forcing displacement of these other verticals but instead compounding pressure across the board.  

Moving forward, ripple effects are likely as manufacturers like Infineon raise prices. Sectors outside AI that also rely on power ICs will all feel the squeeze in the coming months amid a growing supply crunch. Experts expect automotive, industrial, and computing markets to be among the hardest hit.

Sourceability helps customers mitigate power IC shortages by identifying qualified alternate components and supporting inventory and lifecycle strategies that reduce exposure to supply disruptions. With deep category insight and a global supplier network, Sourceability is uniquely positioned to help you stay resilient and secure supply amid pricing volatility.