National security's supply chain problem

For decades, the prevailing logic of globalization held that interconnected supply chains would promote stability. Nations that traded with each other would avoid war, while mutual economic dependence would create shared incentives for peace. Yet this assumption has fractured against the hard reality of geopolitical competition. The COVID-19 pandemic, trade wars, regional conflicts, and semiconductor shortages have revealed that dense supply chain interdependence is not a guarantee of stability—it is a source of profound vulnerability.

The scale of that concentration is substantial. Defense software company Govini's 2025 National Security Scorecard found that nearly one in ten Tier 1 suppliers supporting major U.S. defense programs are Chinese firms, with dependence particularly pronounced in missile defense systems (11.1 percent) and nuclear systems (7.8 percent). Meanwhile, the European Union remains nearly 90 percent import dependent for many critical raw materials, according to a 2025 analysis by the Hague Centre for Strategic Studies.

From semiconductors and rare earth minerals to energy infrastructure and digital systems, governments worldwide are confronting a common challenge: national security now depends on controlling critical chokepoints embedded within global supply chains. As a result, states are treating such supply chains not simply as economic systems but as strategic assets whose disruption could carry profound consequences.

The architecture of vulnerability

Global supply chains are marvels of efficiency. Optimization for cost and speed has driven companies to locate production in low-cost countries, outsource components across continents, and maintain minimal inventory. This system works brilliantly in stable times—until it doesn't. The moment a single point of failure is disrupted, the entire chain can fracture.

The 2024 discovery of undocumented cellular radios embedded in Chinese-made solar inverters installed in residential and commercial energy systems highlighted the extent to which critical infrastructure now depends on globally sourced technology. Because solar inverters help regulate the flow of electricity between power systems and the grid, concerns quickly emerged about the potential security implications of remotely accessible components embedded within critical energy infrastructure.

Digital systems present similar risks. In July 2024, a faulty software update issued by cybersecurity company CrowdStrike caused malfunctions in approximately 8.5 million Microsoft Windows devices worldwide. Airlines grounded flights, banks experienced disruptions, and healthcare providers postponed services. The incident underscored how deeply modern economies depend on a relatively small number of companies, technologies, and networks whose disruption can reverberate far beyond their immediate users.

Semiconductors and strategic chokepoints

Few industries better illustrate this challenge than semiconductors.

Modern economies depend on advanced chips for everything from smartphones and medical devices to military systems and artificial intelligence. Yet production remains highly concentrated. According to the International Trade Administration, Taiwan accounts for more than 60 percent of global foundry revenue and over 90 percent of leading-edge chip manufacturing. Much of that capacity is concentrated within a single company, Taiwan Semiconductor Manufacturing Company, better known as TSMC.

That concentration is not limited to chip fabrication. Extreme ultraviolet lithography machines, essential for producing the most advanced semiconductors, are manufactured exclusively by the Dutch company ASML. Each system costs more than $200 million and represents technology that no competitor currently offers at scale. Taiwan's dominance in chip manufacturing and ASML's monopoly on production equipment create a dual chokepoint: even if production capacity existed elsewhere, manufacturers could not access the machinery to build advanced chips.

These dependencies have elevated stability in the Taiwan Strait into a matter of global economic significance. U.S. intelligence assessments have indicated that Chinese President Xi Jinping instructed the People's Liberation Army to be prepared for a potential invasion of Taiwan by 2027, before efforts to diversify advanced semiconductor production are expected to meaningfully reduce dependence on the island.

The risks associated with such concentration are not theoretical. Semiconductor shortages during the COVID-19 pandemic disrupted manufacturing across multiple continents, forcing automakers and electronics producers to scale back production.

Minerals, trade routes, and economic leverage

Critical minerals represent another area of growing concern.

Gallium, germanium, and other specialized materials play essential roles in semiconductors, telecommunications equipment, renewable energy technologies, and defense systems. According to the United States Geological Survey, China produced 98 percent of the world's low-purity gallium in 2024, alongside 68 percent of germanium output and 48 percent of antimony production.

The implications of that concentration became apparent when China imposed export restrictions

on gallium and germanium and later announced a ban on exports of both materials to the United States in December 2024. A study cited by the Center for Strategic and International Studies estimated that a full-scale Chinese embargo on gallium could reduce U.S. gross domestic product by approximately $8 billion.

The challenge extends beyond minerals to maritime geography itself. Three critical shipping routes now represent potential chokepoints in global trade: the Suez Canal, through which roughly 15 percent of global commerce flows; the Panama Canal, essential for linking Asia with the eastern United States and Latin America; and the Strait of Hormuz, where approximately 20 percent of the world's oil passes through waters controlled by Iran.

The strategic importance of Hormuz was underscored during the 2026 conflict involving Israel, Iran, and the United States. Shipping traffic through the strait fell sharply as Iran effectively restricted passage and commercial operators diverted vessels because of security concerns. According to the International Maritime Organization, roughly 20,000 mariners and 2,000 ships were stranded in the Gulf at the height of the disruption, demonstrating how instability in a narrow waterway can reverberate through global energy markets and supply chains.

The cost of resilience

Governments have responded by seeking to diversify suppliers, increase domestic production, and reduce dependence on concentrated sources of supply.

The European Union offers one of the clearest examples. Faced with heavy dependence on imported critical materials, European policymakers have adopted a strategy often described as "open strategic autonomy." Under the Critical Raw Materials Act, the EU aims to reduce dependence on any single third country supplier while strengthening domestic processing and manufacturing capacity. The European Commission has set a target of reducing dependence on strategic material imports from around 90 percent to 65 percent by 2030.

Yet reducing vulnerability comes at a cost.

The OECD's June 2025 Supply Chain Resilience Review warns that broad efforts to relocalize production could reduce global trade by 18 percent and lower global real GDP by more than 5 percent. Rather than advocating wholesale reshoring, the OECD argues that resilience depends on a combination of trade facilitation, efficient services regulation, digital transparency, and international cooperation.

The dilemma facing policymakers is therefore not whether to choose between security and globalization, but how to balance them. Supply chains optimized solely for efficiency are vulnerable to disruption. Supply chains designed solely for security can become prohibitively expensive. The era of treating supply chains as purely economic matters has ended. In an interconnected world, control over the arteries of global commerce has become a central component of national power.