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Covid-19 Disruptions Highlight Risks of Tech’s Concentrated Supply Chain

Most of the world’s chips, devices and networking equipment are made in only five places. Diversification could make the sector more resilient.

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Covid-19 Disruptions Highlight Risks of Tech’s Concentrated Supply Chain
en

The Covid-19 global pandemic has caused acute disruptions in the technology sector supply chain, highlighting the need for a trend that was already underway: diversifying supply chains to a broader range of locations. Most technology hardware comes from just five places, exposing buyers and sellers to the risks of government actions, such as Malaysia’s broad shutdown of factories, including test and supply plants, during the Covid-19 outbreak. One notable point of tensions is that most semiconductor fabrication plants are in China and Taiwan. Technology companies like Nvidia, Qualcomm and Apple rely on these facilities to produce the most advanced chips. Taiwanese chip maker TSMC announced in May 2020 its plan to build a $12 billion fabrication plant in Arizona—one of many moves across the sector to add redundancy and resiliency to the supply chain.

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