The semiconductor industry’s push toward greater manufacturing independence is exposing vulnerabilities that extend far beyond chip fabrication. A new report from the Semiconductor Industry Association (SIA) reveals that even when manufacturers source equipment and materials from trusted suppliers, critical dependencies can remain hidden several layers upstream. These dependencies create potential disruption points that additional fabrication capacity alone cannot resolve.  

Similar challenges are emerging across Europe’s electronics industry, where investment in semiconductor manufacturing is outpacing attention to the infrastructure needed to turn chips into finished products. Printed circuit boards (PCBs) remain essential to electronics production, yet these less visible segments face their own supply constraints.  

Hidden dependencies expose supply chain vulnerabilities

On paper, the inputs upholding U.S. chip production may look secure. SIA’s October 2026 supply chain report shows there is more to the story.  

The report estimates that U.S. semiconductor players consume roughly $27 billion in equipment and materials each year, with about 95% of that spend going to suppliers headquartered in the United States, Europe, and Japan. However, the risks associated with these vital inputs are tied to factories, not headquarters.  

When SIA mapped where Tier 1 inputs are physically made, the share fell from 95% to just 68%. The remaining 32% comes from sites in China, Taiwan, South Korea, Southeast Asia, and Israel.

For many of these Tier 1 supply categories, risk exposure is significant. SIA scored each input on supplier concentration, ownership, country concentration, exposure to high-risk countries, and sub-tier dependency. According to this analysis, 11% of the observed Tier 1 categories were classified as high vulnerability with an additional 38% being classified as medium vulnerability.

SIA’s report suggests the more consequential risks, though, sit further upstream. Nearly one-third of the roughly 100 sub-tier inputs SIA examined rated as highly vulnerable. These include 13 rare earth elements, gallium, germanium, graphite, and several specialty chemical precursors. Production for many of these critical inputs is concentrated in China and other higher-risk production regions. With those links included, more than three-quarters of Tier 1 categories trace back to at least one highly vulnerable input.  

Even a trusted supplier network can’t insulate buyers from these vulnerabilities. SIA reports that China’s restrictions on critical minerals have constrained exports of gallium, dysprosium, terbium, and yttrium to Japan, with levels hitting zero as recently as June 2026. When the flow of inputs is stifled, whether artificially through export restrictions or by an extraneous circumstance that disrupts any number of logistics nodes, the effects can quickly ripple along the entire value chain.  

Concentration among allies is also important to monitor. For instance, Japan supplies roughly 75% of the ABF substrates used in advanced packaging and 70% of the blanks used to make photomasks for lithography. As seen when a magnitude 7.1 earthquake rocked Japan’s Kumamoto Prefecture in August and disrupted advanced chipmaking facilities, high concentration means a higher risk of market-wide disruption following one unpredictable event in a key region.  

Building more fabs won’t close these gaps in the near term. SIA estimates that new U.S. capacity can take a decade or more to come online and qualifying a new semiconductor-grade supplier can take another three to four years after that.

For buyers working to mitigate risk tied to supply chain dependencies today, a supplier list is only the starting point. Left unexplored, risk may first manifest as extended lead times or unexpected price increases. A clear picture of the factories, refineries, and mines sitting tiers below the suppliers you partner with is essential to true resilience.  

Europe’s PCB manufacturing gaps threaten electronics production

Europe has made domestic semiconductor manufacturing a strategic priority, with public funding aimed at bringing more fab capacity to the continent. But industry experts warn that producing chips alone will not create a stable electronics ecosystem.  

Nicolas Chevalier, director of the French technology transfer center Cisteme, made this case in a recent interview with DirectIndustry. He notes that a chip only becomes useful after it is integrated into a larger electronic system, and achieving this depends on PCBs, substrate materials, assembly capacity, and specialized engineering.  

In addition to the better-known challenges facing the semiconductor industry, Cisteme is also seeing mounting problems around PCBs. According to the European Institute for the PCB Community (EIPC), Europe produced 16% of the world’s PCBs in 2000, but only 2.3% by 2022. Troublingly, the decline is still underway. Data4PCB found that European PCB output grew just 2.4% in 2025 with 11 manufacturers leaving the market while the global output grew more than 11%

Raw material constraints are another key factor, particularly for producing FR-4, the glass-reinforced epoxy laminate used in most commercial and industrial PCBs. Chevalier warns that these material dependencies could become as strategically important as those surrounding chips.

Part of Cisteme’s response is research into bio-based PCB substrates, which aim to address environmental concerns and give manufacturers more options. However, bringing a substrate from experimentation to production at scale is a massive undertaking. A new substrate cannot replace FR-4 at scale until it has been validated for its intended applications and backed by proven production processes and enough industrial capacity.  

About 70% of Cisteme’s work involves very small businesses, SMEs, and mid-sized companies, many of which develop radar, telecommunications, and microwave electronics. Unsurprisingly, the challenges Chevalier describes hit these smaller companies the hardest. When capacity is tightened, these businesses often lack the order volumes necessary to win priority attention from PCB suppliers and assembly partners.  

Assembly is also a concern. Even if Europe expands both chip and PCB production, it still needs enough assembly capacity and engineering talent to turn those components into finished systems. Otherwise, components produced in Europe remain dependent on capabilities located elsewhere.

Chevalier concludes that European investment needs to cover the full value chain, including materials, PCB manufacturing, assembly, and industrial production at competitive prices and volumes. Without those downstream capabilities, Europe’s semiconductor investments may fail to deliver.  

SIA’s research and Europe’s capacity expansion challenge show how vulnerabilities in upstream operations can trickle down to have large impacts on numerous industries. Both expose the limits of industrial strategies that focus primarily on chip manufacturing while overlooking the interconnected supply networks that support it.  

Geographic diversification and regional manufacturing investments will only deliver meaningful resilience when supported by equally strong upstream and downstream capabilities. As governments and manufacturers invest in strengthening domestic semiconductor ecosystems, proactive strategies that encourage domestic operations or strong global partnerships will be paramount.