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Transformations in Global Tech Supply Chains

Global technology supply chains, particularly in the semiconductor and electronics sectors, are undergoing significant changes. According to analysts at DIGITIMES, this transformation is primarily driven by the rapid growth of artificial intelligence (AI), shifts in market leadership, and relocations in global supply chains.

Rise of AI and Changing Market Dynamics

Eric Huang, DIGITIMES' Vice President, highlighted the shift in market power in the tech industry before and after the boom of generative AI. In 2018, five tech companies were part of the world's ten largest by market capitalization. However, by mid-2025, nine out of the top ten are tech firms, indicating a substantial shift. Leading companies in this group include semiconductor giants Nvidia, Broadcom, and TSMC, as well as major players like Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla, all of whom integrate hardware and software and design custom chips.

Changing Roles of Taiwan and China

Huang pointed to significant changes in the roles of Taiwanese and Chinese firms in contract manufacturing. Taiwanese companies had a commanding presence, accounting for 78% of the revenues generated by the top original design manufacturers (ODMs) and electronics manufacturing services (EMS) in 2018, while Chinese firms held only 6.4%. However, by 2024, Taiwan's share dropped to 65% as China's revenue share grew to 22%, driven mainly by orders for consumer electronics. By early 2025, Taiwan's market share rebounded to 70%, largely thanks to increasing demand for AI servers from hyperscalers and Nvidia itself.

The Shift in Semiconductor Landscape

In the semiconductor domain, notable growth has been observed among fabless companies. Nvidia's chip revenue is forecasted to hit $72 billion in 2024, representing a 12% global market share. TSMC continues to lead with a 55% share of the global foundry market. Additionally, Chinese foundries like SMIC and Huahong exhibit significant growth rates of 17.6% and 12.3%, respectively, although they trail in advanced logic processes.

Shaping the Supply Chain: Three Vital Battlefields

Huang noted three primary 'battlefields' that are shaping the technology landscape:

1. Geopolitical Supply Chain Relocation: The ongoing US-China rivalry is leading to a division of production capabilities along geopolitical lines. Many companies have adopted a 'China+1' strategy, shifting assembly operations to Vietnam, India, and Mexico.
2. Cloud Infrastructure: In this arena, Nvidia's GPUs have eclipsed Intel's Xeon CPUs and AMD's chips, becoming the go-to platform for AI workloads. DIGITIMES projects that AI servers will comprise 12% of global server shipments this year, with specialized AI systems expected to grow at an annual rate of 44%, reaching 1 million units.
3. Edge AI Expansion: This encompasses devices such as PCs, smartphones, smart appliances, and more. Huang forecasts that Chinese manufacturers will dominate edge AI in consumer electronics, whereas Taiwanese companies will concentrate on data security and enterprise-focused solutions.

The Evolution of Global Server EMS

DIGITIMES analyst Yen Chou notes a rapid evolution in global server EMS production. Although the US is increasing its capacity, reliance on Asian suppliers remains strong. Taiwan's manufacturing giants such as Foxconn, Quanta, and Wistron have expanded their facilities in the US, specifically in Texas, California, and Tennessee. However, these US-side assemblies still substantially rely on components from Asia, such as Taiwan, China, Malaysia, and Vietnam.

Chou points out that critical assembly processes for most AI servers using Nvidia's H200 GPUs are still centered in Taiwan, although US capabilities are on the rise. Despite having facilities such as TSMC's fabs in Arizona and Amkor's operations, advanced packaging will not be ready before 2027, necessitating a return of GPUs to Taiwan for final processes. This situation is expected to exacerbate the US trade deficit with Taiwan in the near future.

Additionally, Chinese suppliers retain a foothold in the US supply chains, offering critical components, from printed circuit boards to mechanical parts. Recently, there was an uptick in imports from Chinese and Vietnamese manufacturers following new US duties on steel and aluminum. Notably, exports of mechanical components from Vietnam and Malaysia to the US surged in mid-2025, indicating a possible long-term shift.

A Fragmented Global Technology Market

Huang and Chou concur that the global technology market is increasingly divided into three blocs: the US, China, and the rest of the world. While AI accelerators and cloud infrastructure contribute to Taiwan's resurgence in manufacturing, China seems poised to lead in growth related to consumer-focused edge AI.

To further explore these shifts, DIGITIMES will host the upcoming Semiconductor Supply Chain 2025+ Webinar on September 26, 2025. Senior analysts will delve deeper into how AI developments, geopolitical dynamics, and manufacturing changes are influencing global supply chains. This event promises to provide valuable insights.

For information and registration, visit the Semiconductor Supply Chain 2025+ official site.