THE global semiconductor race is often framed in terms of export performance, fabrication capacity and geopolitical rivalry. Yet experience across advanced industrial economies shows that export ambition alone cannot sustain a semiconductor ecosystem. A credible national semiconductor strategy must integrate export capability with structured domestic demand, embedding semiconductor use across core industries and public infrastructure. This integration creates predictable, long-term consumption, reduces volatility and makes investment viable. Industries that consume electronics at scale — energy and smart grids, telecommunications, transport and electric vehicles, defence electronics, consumer electronics manufacturing, and automation-intensive sectors such as textiles and industrial machinery — can serve as anchor markets. Their consistent demand stabilises production cycles, encourages ecosystem depth and ensures that semiconductor capability is rooted in the real economy rather than dependent solely on external markets.
This approach works because domestic integration lowers structural risk while accelerating innovation and ecosystem development. Predictable baseline demand enables firms to invest in workforce development, supplier networks, testing facilities and packaging capabilities without exposure to abrupt global fluctuations. It also strengthens export resilience: industries anchored by domestic consumption are better positioned to scale outward because they possess mature supply chains and proven product ecosystems. International experience illustrates this clearly. South Korea’s semiconductor rise has been reinforced by tight integration between chip production and domestic electronics manufacturing, enabling firms such as Samsung Electronics to scale across consumer, telecom and industrial sectors. Taiwan’s leadership rests not only on foundry excellence but also on a deeply interconnected electronics manufacturing base that supports continuous design and production cycles. China has accelerated semiconductor capability by stimulating internal demand through infrastructure expansion, electric vehicle deployment and telecommunications networks, allowing domestic firms to grow alongside national industrial transformation. These examples show that semiconductor competitiveness is sustained not by exports alone but by alignment between domestic industry, infrastructure and technological capability.
For emerging semiconductor economies, the transition must follow a structured value-addition roadmap. The starting point, complete import dependence, generates minimal local value and fails to build industrial capability. The next stage, semi knocked-down assembly, introduces basic assembly skills but retains dependence on imported components. Completely knocked-down assembly expands domestic participation by incorporating component assembly, surface-mount technology operations and quality control systems, generating moderate value addition. The shift to local manufacturing marks a deeper structural change, introducing printed circuit board fabrication, assembly infrastructure, enclosure manufacturing and structured testing capability. The strategic turning point arrives with domestic design ownership — where printed circuit board design, firmware development, embedded systems architecture and product engineering take place locally. This stage enables intellectual property creation, cost optimisation and technological autonomy. At the highest tier, participation in chip design and packaging enables customised semiconductor solutions and integration into global supply chains, forming the backbone of a sustainable semiconductor ecosystem.
Within this progression, electronics manufacturing services clusters serve as critical enablers. These clusters bring together the essential components of a functioning semiconductor ecosystem: printed circuit board assembly lines, fabrication facilities, testing laboratories, component suppliers, enclosure manufacturers, tooling units, logistics providers and design houses. Their proximity reduces production costs, compresses supply chains and accelerates prototyping and production scaling. More importantly, such clusters ensure that semiconductor value addition remains within the domestic economy rather than dissipating through imports. Without a dense manufacturing ecosystem, domestic demand simply fuels foreign production. With a strong cluster base, domestic demand reinforces domestic manufacturing capability, enabling a virtuous cycle of technological advancement, industrial growth and employment generation.
Policy alignment is essential to support this transition. Tariff structures must be calibrated to encourage domestic value addition, imposing higher duties on fully assembled imports while maintaining lower duties on components, raw materials and semiconductor inputs required for local production. Such tariff engineering should be complemented by targeted research and development incentives, capital support for manufacturing clusters, investment in testing and certification infrastructure, and workforce development programmes. Public procurement policies can further accelerate progress by prioritising locally designed and manufactured products where feasible. Together, these measures create an environment in which firms are incentivised not merely to assemble imported components but to develop design capability, manufacturing depth and intellectual ownership.
Ultimately, semiconductor policy must be understood as industrial policy in its fullest sense. It is not only about chips but about the broader technological and manufacturing ecosystem that supports them. Countries that succeed in semiconductors do so because they integrate design, manufacturing and domestic demand within a coherent industrial framework. For countries seeking to reduce import dependence and strengthen technological sovereignty, the objective should not simply be participation in semiconductor production but progression towards design ownership and ecosystem depth. A semiconductor strategy anchored in domestic industry, supported by manufacturing clusters and aligned policy incentives, offers the most credible path towards long-term competitiveness, industrial resilience and economic transformation.
Forkan Bin Quasem is a managing director of Spectrum and chair of Cybernetics.
