TAIPEI -- Tech suppliers in Taiwan, Japan and South Korea have been bracketed alongside China as "dangerous risks" to U.S. national security -- underlining how Washington's desire to strengthen its supply chains could rebound on business in Asia.
In a 250-page report released on June 8, U.S. officials produced a comprehensive picture of the country's supply chain vulnerabilities in four key areas: semiconductors, battery technology, pharmaceuticals and minerals.
Much of the report is aimed at China, which is competing against the U.S. for dominance in next-generation technology. But the findings also reveal Washington's alarm at its reliance on suppliers in places like Taiwan -- which, although friendly in political and economic terms, is considered to be vulnerable because of its hostile relationship with Beijing.
Analysts and industry leaders say the report serves as a warning to suppliers in Asia that they should prepare to reshape their long-term strategies.
"The Biden administration pointed out a lot of new investment opportunities in the report as the U.S. steps up efforts to build self-reliance," a Taiwanese chip industry executive said of the report. "But it also showed a lot of concerns over its Asian allies like Taiwan, and flagged them as key American vulnerabilities, which we did not see during Trump's time. ... That means all the chip companies in Asia may need to again rethink business strategies looking forward."
Taiwan -- which boasts the world's second-largest semiconductor industry by revenue, after the U.S. -- was mentioned more than 80 times in the White House report, as was Japan. "China" or "Chinese" appeared more than 500 times.
Particularly worrying for Washington is the relationship between Beijing and Taipei. China views the island as a wayward province and has not ruled out the possibility of taking it over by military force. The fact that companies in these two economies own many of the world's semiconductor facilities, the report says, puts the global chip supply chain at "great risk" from geopolitical actions.
"Even a minor conflict or embargo could have immediate major disruptions to the United States and long-term implications for U.S. supply chain resilience," it said.
When it comes to Japan, Washington's concerns include important chipmaking materials. The country provides 90% of the world's photoresist, a light-sensitive material used for etching patterns onto wafers. It also controls a large share of the market for silicon wafers, the foundation onto which integrated circuits are fabricated.
South Korea meanwhile is the global leader in memory chips, thanks to Samsung and SK Hynix.
Peter Hanbury, a partner with Bain & Co. in San Francisco who specializes in technology, manufacturing and semiconductors, said the concentration of the semiconductor industry in East Asia creates risks that threaten national security and access to critical technologies.
"This concentration can create critical control points that can be used by countries against other countries in the form of geopolitical risk," Hanbury said.
He added that the concentration also creates operational risks, including from natural disasters such as droughts, floods and earthquakes, as well as labor strikes. The White House report also flagged risks such as Taiwan's precarious water supply.
Some see the report as a sign that the pendulum is swinging toward more government involvement in tech manufacturing.
"In the past several decades, the U.S. government took a hands-off approach to the market, which partly resulted in the flow of tech manufacturing to the East," one supply chain executive said. "We can see now Washington is escalating its political influence in the industry to regain its control, and this will likely prompt another shift of manufacturing back to the West."
The report said the U.S. will need to make a "whole-of-country" effort to strengthen its manufacturing ecosystem and build a secure and resilient semiconductor supply chain.
The same day the report was published, the U.S. Senate passed a bipartisan bill providing more than $52 billion to bolster American semiconductor manufacturing and research.
The Biden administration said it will also support domestic production of critical medicines, another area covered in the supply chain report. This will include setting up a public-private consortium to increase onshore manufacturing of 50 to 100 existing drugs, and an initial commitment of $60 million to develop technologies for increasing production capacity.
Su Tzu-yun, director of the Institute for National Defense Security Research, said the White House report shows the U.S. government's lack of confidence in the security of supply chains in East Asia, even toward its allies. This is despite Washington's relations with Taipei being the warmest since the two cut diplomatic ties in 1979.
"The comprehensive report suggests that [this issue] is more than just U.S.-China tensions, but also Washington's desire to increase its control over sensitive technologies," Su said.
Willy Shih, professor of management practice at the Harvard Business School, agrees that America is keen to rebuild its tech and manufacturing clout -- but says doing so is no easy task.
"The report is a vision that sets the course and agenda for government action," Shih said. "But I think the task of reshaping is immense, and people don't fully appreciate that it will take 20-plus years in many cases."
The question, he said, is "whether the U.S. has that kind of patience."