Strategic Realignment of Global Semiconductor Supply Chains for Sustainable Development

Introduction: Post-Pandemic Imperatives and the Role of AI

In the wake of significant supply chain disruptions experienced during the COVID-19 pandemic, governments globally are reassessing their industrial strategies. A primary focus has been the reshoring of critical manufacturing sectors, particularly semiconductors. This strategic shift, amplified by the surging demand for high-end processors driven by Artificial Intelligence (AI), aligns with several key United Nations Sustainable Development Goals (SDGs). The effort to build more resilient and localized supply chains directly supports the objectives of fostering innovation, building resilient infrastructure, and promoting sustainable economic growth.

Fostering Innovation and Resilient Infrastructure (SDG 9)

Government Initiatives and Investments

Nations are committing substantial financial resources to bolster domestic semiconductor manufacturing capabilities, a direct investment in the principles of SDG 9: Industry, Innovation, and Infrastructure. The goal is to create resilient infrastructure by reducing dependency on geographically concentrated supply chains, thereby promoting inclusive and sustainable industrialization.

• The United States has initiated programs offering billions of dollars in subsidies to attract domestic investment in chipmaking.
• Global semiconductor leader TSMC is expanding its manufacturing footprint with new or expanded facilities in the United States, Germany, and Japan.
• These investments aim to stabilize the supply of components essential for all modern electronics, contributing to the stability of global commerce and communication infrastructure.

The Importance of Specialized Ecosystems and Quality Manufacturing

Achieving advanced manufacturing capabilities requires more than capital investment. As noted by Nigel Toon, CEO of Graphcore, a cultural ethos that values high-quality, precision manufacturing has been central to the success of industry leaders in Taiwan, South Korea, and Japan. This highlights the “innovation” aspect of SDG 9, where fostering a skilled workforce and a culture of excellence is paramount. The historical development of the industry through outsourcing in the 1990s and 2000s allowed for the creation of highly specialized ecosystems, where firms like ASML, TSMC, and Apple could focus on distinct, critical parts of the value chain.

Promoting Economic Growth and Global Partnerships (SDG 8 & SDG 17)

Enhancing National Economic Capacity and Decent Work (SDG 8)

The strategic push into semiconductor manufacturing extends beyond industrial resilience to encompass SDG 8: Decent Work and Economic Growth. By developing domestic industries, nations aim to create high-value jobs and increase economic productivity. Malaysia serves as a key example of a nation striving to advance its position within the global value chain.

1. Moving Up the Value Chain: Long a hub for chip packaging and assembly, Malaysia is now actively supporting ventures in higher-value areas like chip design.
2. Investing in Infrastructure: The country is fostering the development of data centers, a critical component of the digital economy.
3. Strategic Partnerships: In a significant move to build its design capabilities, the Malaysian government announced a major investment to access Arm’s high-end chip blueprints.

The Imperative of International Collaboration (SDG 17)

Despite the trend towards reshoring, experts emphasize that global collaboration remains essential, reflecting the core principle of SDG 17: Partnerships for the Goals. The semiconductor industry is a complex, interconnected web that thrives on specialization. Will Abbey, Vice President at Arm, noted that the rise of AI is compelling all stakeholders to rethink infrastructure and data control, reinforcing the need for new collaborative models. A sustainable future for the industry depends on a system where different economies can contribute their unique strengths, fostering a global partnership where, as Mr. Toon suggests, each nation can “own this critical piece” while working in concert with others.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

SDG 8: Decent Work and Economic Growth

• The article discusses government efforts to “boost domestic investment” and “reshore manufacturing,” which are strategies aimed at stimulating economic growth and creating jobs within national borders. Malaysia’s ambition to “move up the value chain” from assembly to chip design is a clear example of striving for higher economic complexity and value-added activities.

SDG 9: Industry, Innovation, and Infrastructure

• This is the most central SDG in the article. The entire piece revolves around building resilient infrastructure (semiconductor manufacturing plants), promoting industrialization (“ramp up their efforts to reshore manufacturing”), and fostering innovation (AI, high-end chip design). The text explicitly mentions building “domestic chip manufacturing capability” and investing in “new chip design and data center ventures.”

SDG 17: Partnerships for the Goals

• The article highlights the complex interplay between national interests and global cooperation. While governments are pushing for domestic production, the text acknowledges the existing global ecosystem where “different economies to work together” is essential. The mention of government subsidies (“billions of dollars”) for private companies like TSMC and Malaysia’s deal with Arm are examples of public-private partnerships aimed at achieving technological and industrial goals.

2. What specific targets under those SDGs can be identified based on the article’s content?

SDG 8: Decent Work and Economic Growth

• Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation.
  • This target is reflected in Malaysia’s strategy to not just be a hub for “chip packaging and assembly” but to “strive to move up the value chain through support for new chip design.” This represents a move towards higher-value, technology-intensive economic activities.

SDG 9: Industry, Innovation, and Infrastructure

• Target 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product.
  • The U.S. government’s push to “reshore manufacturing” and “boost domestic investment” in semiconductors directly aligns with this target of increasing the industry’s share of the national economy.
• Target 9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable.
  • The article’s focus on building new, advanced manufacturing facilities, such as TSMC planning to “build or expand new plants in Germany, Japan and the U.S.,” is a direct effort to upgrade industrial infrastructure.
• Target 9.b: Support domestic technology development, research and innovation in developing countries.
  • Malaysia’s government “paying Arm $250 million over the next decade for seven of the company’s high-end chip blueprints” is a direct investment in supporting domestic technology development and innovation capabilities.

SDG 17: Partnerships for the Goals

• Target 17.17: Encourage and promote effective public, public-private and civil society partnerships.
  • This is demonstrated by governments pledging “billions of dollars in subsidies” to attract private companies like TSMC to build manufacturing plants. The deal between the Malaysian government and the private company Arm is another clear example of a public-private partnership to advance national strategic goals.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Indicators for SDG 9

• Financial Investment in Infrastructure and Innovation: The article provides specific monetary values that can serve as indicators for investment in industrial infrastructure and technology.
  • “billions of dollars in subsidies” promised by governments to boost domestic investment.
  • TSMC’s pledge to “increase its investment in its Arizona plant by $100 billion.”
  • The Malaysian government “paying Arm $250 million over the next decade.”
• Development of New Industrial Facilities: The number of new manufacturing plants can be an indicator of infrastructure development.
  • The article mentions “TSMC… planning to build or expand new plants in Germany, Japan and the U.S.”

Indicators for SDG 8

• Shift in Economic Activity: A qualitative indicator for progress towards Target 8.2 is the shift in the type of industrial activity.
  • Malaysia’s effort to move from “chip packaging and assembly” to “chip design and data center ventures” indicates a move up the economic value chain.

Indicators for SDG 17

• Value of Public-Private Partnerships: The financial commitments mentioned under SDG 9 also serve as direct indicators for Target 17.17, as they quantify the scale of these partnerships.
  • The “$100 billion” investment by TSMC in Arizona, spurred by government incentives, and the “$250 million” deal between Malaysia and Arm are concrete examples.

4. Table of SDGs, Targets, and Indicators

Source: fortune.com