The United States and the European Union are prioritizing domestic sourcing of critical semiconductor materials in response to national security concerns and global supply risk. The effort to reduce dependence on international suppliers, especially those in East Asia, is changing how companies and policymakers approach raw material access. Erik Hosler, an expert in semiconductor innovation, recognizes that building domestic capacity for materials is just as essential as building fabs, with long-term competitiveness resting on both.
The push toward localization does bring clear opportunities, but it also comes with significant constraints. Scaling domestic supply chains for high-purity gases, rare earth elements, silicon wafers and specialty chemicals is complex, capital-intensive and subject to environmental, logistical and regulatory challenges. While regional self-reliance is gaining momentum, it must be weighed against the practical realities of sourcing, refining and qualifying materials at scale.
Why Materials Matter in Localization Efforts
Semiconductor manufacturing is uniquely dependent on a diverse set of high-performance materials. Each step in the chipmaking process, lithography, etching, deposition and packaging, requires carefully engineered inputs that must meet rigorous quality and purity standards. Many of these materials are currently sourced through global networks involving multiple countries and long logistics timelines.
Critical inputs include high-purity silicon, noble gases like neon and argon, advanced photoresists, specialty polymers and metals such as cobalt and tantalum. Some of these materials are extracted in one country, refined in another and shipped to a third for final use. This interdependence introduces risk, as political tension, natural disasters, or trade restrictions can disrupt multiple points of the chain.
Localizing material sourcing aims to shorten these supply lines, reduce risk exposure and create tighter alignment between upstream inputs and domestic manufacturing growth. It also supports national security goals, ensuring that chip production for defense, health care and infrastructure does not rely on unpredictable international sources.
Opportunities in Domestic Supply Chain Expansion
The shift toward local sourcing is creating new opportunities for investment, innovation and vertical integration. In the United States, funding from the CHIPS and Science Act is not limited to fabs; it also includes incentives for companies developing domestic capacity in chemicals, gases and engineered substrates.
Several U.S. companies are expanding production of photoresists, chemical mechanical polishing slurries and high-purity gases with the goal of supplying new fabs under construction in Arizona, New York and Ohio. In parallel, government partnerships are supporting efforts to reopen or modernize dormant rare earth mines and to build out refining and metallurgical infrastructure.
In Europe, the EU Chips Act is similarly focused on supporting localized supply chains. Germany, France and the Netherlands are investing in material science hubs that aim to reduce reliance on imported silicon wafers and chemical precursors. These efforts are supported by universities and R&D institutions that are accelerating innovation in recyclable materials and sustainable extraction methods.
This emphasis on localization is also fostering collaboration between fabs and suppliers. Early engagement helps vendors develop material specs that align with production roadmaps, improving integration and reducing qualification time.
Constraints Of Geography, Cost and Regulation
Despite growing interest and investment, localizing material sourcing faces practical limits. Many critical inputs, such as rare earth elements, are not found in large quantities in North America or Europe, requiring significant exploration, permitting and infrastructure to develop alternatives. Even when resources are available, domestic production often costs more due to labor, environmental and safety requirements. Government support or long-term contracts are often necessary to make these efforts viable.
Regulatory hurdles add to the complexity. Mining and chemical processing face lengthy approval timelines and local opposition over environmental or health concerns. Scaling from pilot production to supplying high-volume fabs also requires consistent quality, delivery and redundancy, which are difficult to achieve without significant investment and coordination.
Building Resilience Through Material Innovation
While localizing traditional materials is difficult, there are opportunities to rethink them. Innovation in engineered substrates, synthetic gases and greener alternatives is opening new pathways for resilience.
Material science startups are exploring alternatives to rare earths, high-efficiency purification processes and novel polymers that perform under extreme fab conditions. Public-private R&D consortia are investing in new classes of etchants, resist materials and barrier films that reduce dependency on volatile substances.
This shift toward material innovation supports broader sustainability goals. Using less hazardous materials, reducing waste and lowering energy consumption in processing are aligned with climate mandates in both the U.S. and EU. Companies that innovate in this space can gain a competitive edge while contributing to supply chain resilience.
The evolution of chip functionality is tightly linked to the evolution of the materials that enable it. Erik Hosler remarks, “Working with new materials like GaN and SiC is unlocking new potential in semiconductor fabrication.” These materials are not only expanding what chips can do. They are forcing a reevaluation of where and how inputs are sourced. Material flexibility is becoming just as important as design scalability.
Creating Strategic Inventories and Buffer Capacity
In situations where localization is not immediately feasible, companies are turning to strategic inventory management. By holding a buffer stock of critical materials such as photoresists, noble gases and advanced cleaning agents, fabs can insulate themselves from short-term disruptions.
Some governments are also establishing national reserves of essential materials, like energy stockpiles. These reserves can be drawn upon in emergencies, providing a stopgap while longer-term supply chain solutions come online.
In parallel, more fabs are entering long-term contracts with multiple suppliers to reduce dependency on any single source. These agreements often include co-investment in local production facilities or joint R&D to improve material yield and purity.
Policy Alignment and Industry Coordination
Policy frameworks are beginning to reflect the material dimension of semiconductor sovereignty. Funding programs now require applicants to outline material sourcing strategies, workforce development plans and environmental compliance protocols.
International alliances are forming to coordinate sourcing strategies. The United States, Japan and South Korea are working together on rare earth diversification, while the EU is negotiating with African and South American nations on stable supply partnerships.These efforts aim to reduce duplication, share risk, and build a cooperative infrastructure for materials access that spans borders without reinforcing single-source vulnerabilities.
A Balanced Approach to Strategic Self-Reliance
Localizing semiconductor material sourcing offers a clear pathway to resilience, but it is not easy. It requires a careful balance of opportunity and constraint, cost and benefit, short-term readiness and long-term innovation.
By investing in domestic capabilities where feasible, building partnerships where needed and advancing material science to reduce dependency, the semiconductor industry can create a more secure and sustainable foundation for the future.The road to localization is not about eliminating global trade; it is about building flexible, diverse supply chains that can adapt to disruption, support strategic autonomy and deliver the materials essential to the world’s most critical technology.