It is easy to think of semiconductors as no more than the hidden engines of consumer convenience. They sit quietly inside our mobile phones, televisions, smartwatches, and games consoles, enabling the seamless digital lives many of us now take for granted. However, reducing them to mere enabler of entertainment and communication means missing their true breadth of use: microchips are woven into the fabric of modern society and, if their supply were seriously disrupted, the consequences would extend far beyond delayed gadget launches or rising prices on the high street. The continuity of essential public services would be at stake.
Concerns about semiconductor scarcity are not hypothetical scaremongering. The global supply of advanced chips is fragile as production depends upon a small number of highly specialised fabrication plants, concentrated in a handful of territories. The most sophisticated semiconductors are overwhelmingly manufactured in Taiwan, which accounts for over 90% of global output. This concentration reflects decades of industrial strategy, investment, and expertise, but it also creates a potentially critical point of failure in an increasingly tense geopolitical landscape.
Recent years have shown how quickly supply chains can be destabilised. Sanctions and countersanctions, export controls, cyberattacks on industrial systems and even precautionary shutdowns, prompted by security concern have all affected the flow of critical components. Semiconductor fabrication is especially vulnerable because it requires ultra-clean environments, uninterrupted electricity supplies, advanced lithography equipment and highly specialised engineers. A disruption to any one of these elements can halt production for months.
It is in this context that the so-called ‘broken nest’ theory has attracted attention. Developed by Dr. Jared M. McKinney and Dr. Peter Harris this concept suggests that when an asset has such a strategic value, a state may prefer to render it unusable rather than allow it to fall into hostile hands. Applied to Taiwan’s semiconductor ecosystem, this means that if the island could not be defended, its chip manufacturing capacity might be deliberately incapacitated to deny adversary control. Given the complexity of semiconductor fabrication, it would not require large-scale action to achieve such an outcome, as even limited damage to facilities or supply lines could disable production for a prolonged period.
For Taiwan, this might be conceived as a form of deterrence by denial, but for the rest of the world, the ramifications would be profound. Global industries from automotive manufacturing to telecommunications would feel the shock immediately. However, probably the most serious and lest appreciated impacts would likely be felt in the public sector.
Modern public infrastructure is saturated with semiconductors. In healthcare, they underpin diagnostic imaging equipment, patient monitoring systems, laboratory analysers and increasingly sophisticated treatment devices. Water treatment plants rely upon digital sensors and automated controls, transport networks depend on signalling systems, traffic management platforms and air-traffic control technologies, data centres and communication network, which support digital government services, are inconceivable without advanced processors. Defence capabilities, emergency response coordination, and border security are similarly reliant on embedded electronics.
The challenge is that these dependencies are often invisible, as public bodies typically procure complex systems such as medical scanners, signalling suites, and server clusters, rather than individual components. The semiconductors within those systems may sit several tiers down the supply chain, sourced through layers of suppliers and subcontractors. The result can be a misplaced confidence that supply risks are someone else’s problem.
In private markets, scarcity is mediated by price and companies facing shortages can, in principle, bid more aggressively to secure supply, pass on costs to customer or reallocate capital swiftly. Public institutions operate under different constraints, especially considering that budgets are set through political processes and are rarely flexible at short notice. The longstanding emphasis in public procurement on efficiency, competition and cost minimisation has delivered savings, but it has not always accounted for resilience. Continuity of service is itself a public good, yet it is seldom priced explicitly into contracts.
If advanced semiconductors were to become unavailable for an extended period, the public sector would have limited room for manoeuvre resulting in infrastructure upgrades being deferred indefinitely because replacement components cannot be sourced. Maintenance cycles could stretch beyond prudent limits as spare parts grow scarce, legacy systems might continue operating without vendor support, increasing the risk of failure or cyber vulnerability and ambitious digital transformation programmes could stall, leaving agencies reliant on ageing technology. Ultimately, rationing decisions would loom: which services must be prioritised and which can tolerate degradation?
Such choices are too consequential to be improvised during a crisis, and public-sector procurement functions should therefore treat semiconductor dependency as a strategic risk demanding structured analysis. The first step is comprehensive dependency mapping, which involves tracing supply chains beyond immediate contractors to identify where critical components originate and requires collaboration with suppliers to understand tier-2 and tier-3 exposures and to assess geographic concentrations of risk. Alongside this, institutions should conduct criticality assessment of their own systems, distinguishing between those that are mission-critical and those where temporary degradation would be manageable. On the basis of this analysis, procurement teams can develop prioritisation framework that clarify, in advance, how scarce components would be allocated across services in a constrained environment.
Monitoring in equally important, as geopolitical developments, export control regimes, industrial policy shifts and insurance conditions can all provide early warning signals of stress within semiconductor supply chains. Integrating such indicators into procurement dashboards allows organisations to move from reactive crisis management to anticipatory planning.
Alternative suppliers or technically compatible components should be validated in advance, taking into account regulatory approvals and integration timelines. Additionally, strategic stockpiling may be appropriate for certain high-criticality components, particularly those with lead tines of over 12 months.
Finally, resilience requires accountability and senior responsibility for supply-chain risk should be clearly assigned, while contingency plans should be reviewed at least annually. These plans must be integrated with wider business continuity and emergency response frameworks, ensuring that semiconductor disruption is treated not as an abstract industrial issue but as a concrete operational risk.
Semiconductor shortages are not just an inconvenience for technology enthusiasts or a headache for manufacturers, they represent a systemic vulnerability embedded within the infrastructure of modern government. A major disruption may never materialise but if it does, the public sector needs to be prepared.
About the author:
Mark Roberts, Public Sector Director at JAGGAER
