Fabs & the chip supply chain
Advanced AI chips depend on a handful of highly specialised factories, tools and materials.
D1 · StoryFor young children and total beginners
Chips are made in special factories called fabs, which are cleaner than a hospital. Only a few places in the world can make the most advanced chips.
It's like a recipe that needs a special oven that only a few bakeries own.
Like: A special oven that only a few bakeries have.
D2 · PictureFor curious beginners
Making an AI accelerator involves chip design, fabrication at a foundry, advanced packaging that places memory right next to the processor, and testing.
Each step relies on specialised equipment and suppliers, and several steps are concentrated in a small number of companies and countries.
That concentration is why chip supply shows up in trade policy and export controls.
From design to server
- Design: chip architecture
- Fabrication: at a foundry
- Packaging: joins memory
- Test: and assembly
- Servers: into data centres
Like: Like a relay race where some legs can only be run by one or two athletes in the world.
Where it breaks: In a relay a missing runner can be replaced by a slower one. In chip-making some steps have no practical substitute at all in the short term.
D5 · FrontierFor experts
Open problems: spreading advanced manufacturing across more regions, the pace of new process generations, and how export controls reshape who can build frontier systems.
Sources
- SIA & BCG: Emerging Resilience in the Semiconductor Supply Chain (2024)
- SIA & BCG: Strengthening the Global Semiconductor Supply Chain in an Uncertain Era (2021)
- ASML Form 20-F, fiscal year 2025 (2026-02-25)
- BIS rule: Refinements to Controls for Advanced Computing and Semiconductor Manufacturing Items (2024-12-05)
- SemiAnalysis: AI Capacity Constraints - CoWoS and HBM Supply Chain (2023-07-05)
- TSMC Q3 2025 earnings call transcript (2025-10-16)