Asia is expected to remain the centre of the global semiconductor industry for at least the next five years, a new report says.

Moody’s Ratings, in an analysis released on September 2, underscores the region’s enduring advantages in cost, technical expertise, and a deeply integrated supply chain. This dominance is expected to persist even as geopolitical tensions and efforts to diversify supply chains intensify.

The study highlights a significant barrier to any wholesale shift in production away from Asia – the staggering cost. Moody’s estimates that creating a self-sufficient semiconductor supply chain outside of Asia would require an upfront investment of approximately US$1 trillion.

Such a move would not only be a monumental financial undertaking but would also likely increase global chip prices by as much as 65%, a cost that consumers and industries would ultimately bear.

With Asia already accounting for over 75% of global capacity across wafer fabrication, materials, and packaging, the report concludes that replicating this scale is commercially unfeasible in the near term.

Diversification of capacity

While a mass exodus of chipmaking facilities from Asia is unlikely, the report notes a clear trend of diversification driven by evolving trade restrictions and geopolitical uncertainty. Major industry players are funnelling significant capital into new facilities in the United States, Europe, and Japan.

The report cites several high-profile examples. Taiwan-based TSMC is committing US$165 billion to build six fabrication plants and R&D facilities in the US state of Arizona. Samsung Electronics is investing US$37 billion in a new facility in Texas.

In Japan, TSMC’s joint venture – Japan Advanced Semiconductor Manufacturing ( JASM ) – is spearheading the development of two new plants in Kumamoto on Kyushu island with a total investment of US$20 billion.

Moody’s says these projects, while substantial and often supported by government subsidies, represent a strategic diversification of capacity rather than a fundamental shift away from Asia. They are designed to mitigate risk and cater to local demand rather than to challenge Asia’s overall market leadership.

China’s uneven progress

The report also provides a detailed look at China’s push for self-sufficiency, describing its progress as “uneven”.

The Asian giant has made considerable strides in certain areas, particularly in mature-node production ( 28 nanometres and above ), and is projected to expand its share of global assembly, testing, and packaging capacity to 32% by 2032.

China’s domestic chip design sector has also seen a sharp increase in the number of firms, with a growing adoption of open-source architectures like RISC-V.

However, significant gaps remain. The report points out that China’s self-sufficiency rates for critical electronic design automation software and chipmaking equipment stood at a mere 10–14% in 2024, a far cry from the government’s ambitious 70% target for 2025.

Export controls on advanced lithography tools continue to be a major hurdle, restricting China’s ability to produce next-generation chips below 5 nanometres.

Emerging back-end hubs

Meanwhile, South and Southeast Asia are solidifying their roles as crucial back-end hubs, according to the study.

By 2032, the region is expected to command nearly a quarter of the global assembly, testing, and packaging capacity. Malaysia is highlighted as a current leader, with Vietnam projected to reach 8% share in capacity.

Exports of semiconductors to markets such as Vietnam, Malaysia, and India are rising because of their growing roles as hubs for back-end chip processing and electronic products assembly. Exports of integrated circuits from Taiwan and South Korea to the three economies have grown to 10.5% and 17.8% in 2024, respectively, up from 4.8% and 15.2% in 2020, and 3.5% and 1.9% in 2010.

Japan also saw an increase in sales of semiconductor manufacturing equipment to these markets.

While these activities are driving export growth, Moody’s cautions that technical gaps in R&D, talent, and infrastructure could prevent these economies from moving into higher-value segments like chip design and fabrication without stronger state support and global partnerships.

Advanced chipmaking leaders

Taiwan, South Korea, and Japan continue to be leaders in advanced chipmaking. These economies dominate the production of cutting-edge sub-5-nanometre chips and key equipment components, and their semiconductor exports are increasingly vital to their national economies.

While rising overseas investment and China’s growth will redirect some demand, the overall impact on these leaders will be modest, as regional diversification of exports and investments will largely offset any shifts, the report says.

Moody’s Ratings asserts that the global semiconductor industry is adapting to a more fragmented and uncertain environment. However, Asia’s deep-rooted advantages in cost, industrial ecosystems, and talent depth will continue to sustain its central role in global semiconductor manufacturing for the foreseeable future.