SEMICONDUCTORS Semiconductor supply chains and the future of clean energy

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The global transition to renewable energy is being held back by ongoing geopolitical tensions, trade restrictions, and the inherent structural vulnerabilities of semiconductor manufacturing. We explore how the fragility of the semiconductor supply chain is impacting the green energy revolution, what a worst-case scenario might look like, and what can be done to mitigate the risk of a semiconductor supply chain crisis.

Semiconductors are critical to the continued transition from fossil fuels to renewable energy. Every solar inverter, wind turbine converter, battery energy storage system, electric vehicle (EV) drivetrain, charging station, and modern grid substation relies on increasingly sophisticated power electronics.

But semiconductors aren’t like other industrial technologies. Supply chains are incredibly complex and highly sensitive to disruption. Key tools and manufacturing equipment are concentrated among a small number of suppliers. The availability of essential materials is also tightly constrained.

Production and logistics depend on highly coordinated global flows. Shipments are subject to export controls, customs procedures, and regulatory requirements across multiple jurisdictions. Deliveries to semiconductor fabrication facilities must be carefully timed and synchronised to maintain production schedules.

Any disruption to this system can cause significant impacts across a wide range of downstream industries. Especially the energy sector.

The resilience of the semiconductor supply chain determines the speed of the energy transition. For anyone who knows anything about the semicon industry, this is a particularly sobering thought.

Investing in a renewable future

Global greenhouse gas emissions (GHGs) rose by 0.3% between January 2025 and January 2026.¹ Temperatures are expected to hit or break record levels within the next five years.² The 2015 Paris Agreement goal of limiting global temperature rise to 1.5°C is increasingly seen as difficult to achieve under current trajectories.³

Limiting warming to below 2°C will require sustained and large-scale investment in wind and solar deployment and a massive expansion of electrification infrastructure. The European Commission estimates that the energy sector will require an investment of approximately US$755 billion annually between 2026 and 2030 in order to achieve decarbonisation goals. This figure is expected to increase to US$795 billion annually between 2031 and 2040.⁴

At the time of writing, two-thirds of global energy investment is now directed towards clean energy.⁵ Global renewable energy capacity has also reached a record 5,149 Gigawatts (GW), almost half of all installed power capacity worldwide.⁶

According to the International Energy Agency (IEA), global electricity demand is growing at twice the rate of energy demand.⁷ Meeting the world’s increasing need for electrical power without drastically increasing GHG emissions means we’ll have to significantly ramp up our efforts to complete the transition to renewable energy.

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What are the critical connections between semiconductors and green energy?

Building a global renewable energy system is not just a matter of capital allocation or technological development. Almost every aspect of a clean energy system depends on converting, controlling, and conditioning electricity rather than simply generating it. The main constraint now is our ability to build and scale the industrial systems needed to make clean energy usable at scale.

Semiconductors sit at the very heart of the green energy transition. The power electronics that convert and control electricity in renewable energy systems simply can’t function without them.

Solar panels need inverters to turn DC into usable AC power. Wind turbines rely on power converters to feed electricity into the grid. EVs depend heavily on high-performance power semiconductors like SiC, IGBTs, and MOSFETs to manage efficiency and performance. Battery storage systems need bidirectional converters to store and release energy. Modern electricity grids are increasingly reliant on digital control systems.

Without a reliable, constant supply of semiconductors, the continued rollout of renewable energy and electrification infrastructure across the globe could grind to a halt. Unfortunately, the semiconductor supply chain is anything but robust, reliable, or predictable.

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How fragile is the semiconductor supply chain?

Supply chains are often associated with the heavy-duty infrastructure of logistics. A globalised network of container ships, trucks, and freight aircraft operated by highly trained handlers, drivers, pilots, captains, and operators.

But the reality of semiconductor supply chains belies the reliable and robust image of logistics. Despite the outward appearance of industrial might and agility, the worldwide semiconductor industry is connected via a fragile web of concentrated suppliers, tightly interdependent production stages, and long, inflexible logistics chains.

Instead of unbreakable steel cables, gossamer-thin threads hold the semiconductor ecosystem in place. And it only takes the slightest disturbance to break these threads and throw entire industries into disarray.

There’s no easy way to substitute components or reroute production without critical semiconductor inputs. A single missing chip or component can stall production of inverters, grid controllers, EV drivetrains, or battery systems. The deployment of major renewable energy projects can be delayed or even cancelled.

The future of the renewable energy revolution hangs in the balance on the gossamer threads that connect semiconductor suppliers and manufacturers.

Uncertainty, volatility, and disturbance have always been a part of the semicon supply chain. However, a range of factors means that the risk involved in shipping semiconductor materials, equipment, and tools across borders is now higher than ever.

What are the drivers behind semicon supply chain volatility?

A small number of firms and regions still dominate the supply of the machines and tools required for advanced chip manufacturing. ASML has a global monopoly on the most advanced Extreme Ultraviolet (EUV) and Deep Ultraviolet (DUV) lithography machines. Etching and deposition technologies are controlled by Japanese and American companies such as Applied Materials (AMAT), Lam Research, and Tokyo Electron (TEL). Inspection and metrology tools used to measure and find chip defects are also mainly produced in the USA and Japan by KLA Corporation and Hitachi High-Tech.

The production of semiconductors is also tightly controlled within specific geographic areas. The Taiwan Semiconductor Manufacturing Company (TSMC) is the largest independent semiconductor foundry on the planet. At the time of writing, TSMC controls almost 70% of the global foundry market.⁸ The only company to even get close to TSMC is South Korea’s Samsung Electronics, which only has a 7.3% share of the market, at best.⁹

There are also fragility issues with upstream supply chains. Essential chemicals, substrates, and gases are only available from a small number of producers. Some inputs can’t be synthesised or manufactured, which further restricts their availability.

Helium, for example, is an important process gas used in advanced semiconductor manufacturing. Helium is primarily extracted from certain natural gas fields where it occurs in trace amounts and is separated during gas processing. Helium supply is concentrated in a few countries and prone to disruption due to its reliance on a small number of natural gas extraction and refining facilities.

Limited availability of raw materials, long lead times for equipment and tools, and the hyper-specialisation and intense geographic concentration of suppliers mean that fragility and volatility are deeply embedded in the very structure of the semiconductor supply chain.

The logistics behind shipping semiconductor materials, tools, and equipment is itself a supply chain risk. Many semiconductor-related shipments are highly sensitive to shock, vibration, and environmental conditions such as temperature and humidity, particularly advanced manufacturing tools, wafers, and speciality chemicals.

Transporting these shipments across international borders requires specialised packaging, handling, and monitoring at every stage. Shipments must be carefully tracked, inspected, and controlled to ensure they arrive at their destination intact and meet the strict quality requirements required for use in semiconductor manufacturing.

Bureaucracy also poses major risks. Semiconductor shipments must pass through a barrage of customs checks, export licensing processes, security inspections, and other regulatory hurdles spread across dozens of countries and jurisdictions.

For example, a semiconductor component manufactured in Taiwan and destined for the United States may be subject to customs clearance procedures, export control compliance checks, trade documentation requirements, transportation security screening, and import inspections before it reaches its final destination.

These types of bureaucratic hurdles aren’t in place for purely administrative purposes. They’re now being used as active instruments of state power to control the flow of critical technology. Microchips are now seen as dual-use strategic assets with civilian and military applications. Semiconductors are central to national security and economic power.

The United States and its allies are engaged in a tightening cycle of export controls, licensing regimes, and security screening designed to restrict access to cutting-edge semiconductors and the equipment required to produce them. In response, China is deploying countermeasures, including export controls on critical raw materials such as rare earths and advanced semiconductor inputs, as part of an effort to reduce external dependency and strengthen its domestic chip capabilities.

There’s no longer a conventional global market for semiconductors. Instead, we have an emerging bifurcated system of techno-industrial blocs involved in a bitter struggle for computing power, industrial capacity, and long-term economic dominance.

And the supply chain risks don’t evaporate once a shipment has reached the destination. Fabs operate 24/7, 365 days a year and consume a constant stream of specialised materials, gases, wafers, and chemicals. Many of these inputs are expensive, sensitive, and difficult to store in large quantities.

Chip manufacturers rely heavily on precisely timed deliveries. Downtime can be disastrous for production schedules. Replacing any faulty equipment or worn tools is a delicate, complex process that has to be precisely coordinated so that the delivery takes place at the exact time the fab is ready for it. A delayed shipment or a shipment that arrives too early is equally problematic.

Despite the logistical complications and the escalating technological Cold War, the semiconductor industry is going through a boom phase. Global semiconductor sales hit US $790 billion in 2025 and are expected to increase to US$1.5 trillion by the end of 2026.¹⁰

The surge in demand is being driven by the combination of the continued transition to renewable energy and the rapid uptake of AI technologies.

AI requires huge amounts of advanced chips for data centres, GPUs, networking hardware, and high-performance computing. Just one server rack for an AI data centre requires approximately 4,500 advanced node microchips, which can account for 95% of its value.¹¹ Hyperscale data centres have hundreds of server racks. It’s estimated that half of the cost of deploying an AI hyperscale data centre is taken up with acquiring semiconductors.¹² At the time of writing, there are over 10,000 operational data centres worldwide.¹³ As AI use expands, analysts expect the number of data centres to double by 2030.¹⁴

The increasing demand for semiconductors is one of the main drivers of the aggressive expansion of renewable energy. Governments and companies are increasingly looking toward renewable energy sources to power the hyperscale data centres that AI and Cloud computing require.

The green energy revolution is also reliant on semiconductors for grids, inverters, and EVs. EVs can contain 2000 to 3000 semiconductors, twice the number of modern combustion engine vehicles.^15,16 It’s expected that the renewable energy sector will increase its demand for semiconductors by 8% to 10% every year through 2027.¹⁷

The interaction between AI-driven compute demand and the rise in renewable energy has caused an unprecedented cycle of demand for semiconductors. This has increased the immense pressure on the already overstrained and fragile semiconductor supply chains.

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What happens if the semicon supply chain fails?

The world has already experienced what a severe disruption to the supply of semiconductors looks like. During the COVID-19 period, semiconductor supply chains were severely disrupted by factory shutdowns, logistics bottlenecks, and a sudden spike in demand for electronics. The resulting chip shortage lasted between 2020 and 2023. Geopolitical incidents like the Russian invasion of Ukraine and the trade war between the US and China further exacerbated the crisis.

COVID revealed the structural fragility of electrified and digitalised industries. The automotive industry took a massive hit with entire production lines coming to a halt. This wasn’t because steel, labour, or demand disappeared. It was because a small number of chips couldn’t be sourced in time.

The COVID chip crisis was a temporary allocation shock layered onto an already tight supply chain. If the semiconductor supply chain were to experience a more prolonged major failure today, the impacts would cascade across critical industries, causing shortages, delays, price rises, and fragmentation. Within a matter of weeks, automotive manufacturing would stall, the production of computer electronics would come to a halt, and industrial systems would grind to a halt.

For the renewable energy sector, a sustained failure of the semiconductor supply chain would have significant consequences. Renewable energy projects across the globe would face substantial delays. A lack of sufficient semiconductors would create a bottleneck that would severely constrain the rate at which new renewable capacity can be brought online.

The operation of electricity grids would become increasingly difficult as operators would be faced with renewable electricity that cannot be transmitted or used efficiently. Huge amounts of renewable power would go to waste. Supply would become unstable as operations would lose their ability to integrate wind or solar power into the grid. The manufacturing of EVs, solar arrays, wind farms, and battery storage units would slow down and gradually come to a complete stop. Manufacturers would compete fiercely for the available supply of semiconductors, causing prices to skyrocket and intensifying the geopolitical environment.

A major failure in the semiconductor supply chain would not halt the transition to green energy altogether. The cumulative effect would be to slow the pace of the energy transition and increase its cost. Project developers would face longer lead times, higher equipment prices, and greater uncertainty. Governments would struggle to meet renewable energy and emissions reduction targets. With no alternative, electricity systems would have to turn to fossil-fuel generation to maintain grid reliability.

Stabilising the international flow of semiconductors and the tools, equipment, and materials required for their manufacture is critical to maintaining the pace of the renewable energy revolution.

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Is a stable semiconductor supply chain possible?

There are no quick or easy solutions to the problems surrounding the semiconductor supply chain. Indeed, achieving a totally reliable and secure semiconductor supply chain is widely accepted to be an impossible goal.

Putting aside for a moment the fragility caused by geopolitical tensions, natural disasters, pandemics, and fluctuations in demand, the highly specialised nature and geographic concentration of the industry make it inherently vulnerable to supply disruptions and production bottlenecks.

According to a study conducted by the Semiconductor Industry Association (SIA) and the Boston Consulting Group (BCG), there are over 50 points along the semiconductor supply chain where one region controls more than 65% of the global share.¹⁸ Each one of these points represents a potential supply chain vulnerability.

There is also the issue of securing essential rare earth elements, critical minerals, and speciality materials required for semiconductor manufacturing. While in some cases physical scarcity can create supply constraints, the greater issue is that production and processing are heavily concentrated in a small number of countries.

Despite substantial investment by countries in domestic semiconductor manufacturing, achieving a completely disruption-proof supply chain remains unrealistic. But this doesn’t mean there is nothing that can be done to improve resilience.

To enhance resilience, governments and firms must diversify suppliers and regionalise production. Stockpiling critical components can also help mitigate short-term shortages.

Reducing reliance on a single transport method, such as air or sea freight, and taking a multimodal approach to semicon logistics can further reduce exposure to disruption. Real-time logistics tracking and integrated supply chain data systems can help suppliers identify and respond to shocks quickly and avoid delays by rapidly rerouting urgent shipments.

The highly concentrated and complex nature of the semiconductor supply chain represents a key vulnerability in the transition to green energy. Even minor disruptions can have far-reaching consequences for renewable energy manufacturing and infrastructure. Managing these risks will require significant investment and sustained cooperation and coordination between companies and governments.

The US, Japan, South Korea, and Europe are making massive efforts to ramp up regional capacity and increase nearshoring and the geographic diversity of essential materials and equipment.

The pace of these initiatives reflects the truth: there’s no way to replace every gossamer thread in the semiconductor supply chain. These delicate and immensely fragile connections are what keep the future of renewable energy swaying in the balance.

References

¹ https://climatetrace.org/news/climate-trace-releases-january-2026-emissions-data

² https://wmo.int/news/media-centre/new-report-suggests-more-global-temperature-records-ahead

³ https://www.rff.org/publications/reports/global-energy-outlook-2026/

⁴ https://energy.ec.europa.eu/topics/funding-and-financing/clean-energy-investment_en

⁵ https://www.iea.org/reports/world-energy-investment-2025

⁶ https://www.irena.org//media/Files/IRENA/Agency/Publication/2026/Mar/ IRENA-DAT-RE-capacity-statistics-2026.pdf

⁷ https://www.iea.org/reports/global-energy-review-2026/key-findings

^8,9 https://www.moodys.com/-/web/en/us/insights-/corporations-/semiconductors-in-2026-why-supply-chains-are-a-major-bottleneck.html

¹⁰ https://www.semiconductors.org/global-semiconductor-sales-increase-11-month-to-month-in-april/

^11,12 https://www.semiconductors.org/new-report-finds-semiconductors-account-for-95-of-an-ai-data-server-racks-value-encompassing-the-full-stack-of-chip-technologies/

¹³ https://www.cargoson.com/en/blog/number-of-data-centers-by-country

¹⁴ https://www.jll.com/en-us/insights/market-outlook/data-center-outlook

¹⁵ https://pv-magazine-usa.com/2025/01/28/the-semiconductor-crunch-is-easing-whats-next-for-solar/

¹⁶ https://www.nytimes.com/2021/04/23/business/auto-semiconductors-general-motors-mercedes.html

¹⁷ https://earth.org/semiconductors/

¹⁸ https://www.semiconductors.org/strengthening-the-global-semiconductor-supply-chain-in-an-uncertain-era/

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