In the summer of 2019, Japan restricted exports of three critical semiconductor chemicals — hydrogen fluoride, fluorinated polyimide, and photoresist — to South Korea. The dispute was rooted in a decades-old disagreement over wartime labor, but its consequences rippled through the global technology supply chain in a matter of days. Samsung scrambled to secure alternative suppliers. South Korean chipmakers began stockpiling. The episode lasted months, cost billions, and exposed a vulnerability that most people in the technology industry had quietly understood but rarely discussed: the world's most advanced manufacturing depends on a handful of chemicals, sourced from a handful of places, with almost no redundancy.
The United States watched that crisis from a comfortable distance. It shouldn't have. The same vulnerability exists here — arguably worse — and we are only now beginning to reckon with it.
The Invisible Foundation
Modern semiconductor fabrication requires more than 500 specialized chemicals. Ultra-high purity hydrogen fluoride for etching silicon wafers. Photoresists that define circuit patterns at the nanometer scale. Slurries, solvents, and deposition gases that must meet contamination thresholds measured in parts per trillion. These are not commodity chemicals. They are engineered materials with exacting specifications, and the global supply for many of them runs through a remarkably small number of facilities in East Asia.
According to analysis by McKinsey, approximately 60 percent of the critical chemical inputs for U.S. semiconductor manufacturing are currently imported. For some materials — electronic-grade hydrogen fluoride chief among them — there is effectively no domestic production at scale. The global market for semiconductor-grade HF was valued at roughly $290 million in 2022 and is projected to reach $430 million by 2028. Yet the facilities capable of producing it to the required purity are concentrated in Japan, South Korea, and China.
This matters because the United States is in the middle of a historic buildout of domestic semiconductor capacity. The CHIPS and Science Act, signed in August 2022, authorized approximately $280 billion in spending to strengthen domestic chip production, with $52.7 billion specifically appropriated for manufacturing incentives. TSMC is building fabrication plants in Arizona. Intel is expanding in Ohio. Samsung is investing in Texas. These facilities will consume enormous quantities of specialized chemicals — and right now, most of those chemicals will have to be shipped across the Pacific.
Beyond Semiconductors: A Broader Dependence
The semiconductor chemical gap is only the most visible part of a much larger problem. The United States has become deeply dependent on foreign sources — particularly China — for critical chemicals across multiple sectors.
In pharmaceuticals, the picture is stark. Analysis published by the Brookings Institution found that nearly 700 U.S. medicines depend on at least one chemical ingredient sourced exclusively from China. For 41 percent of the key starting materials used in approved U.S. medicines, China is the sole supplier. For one in ten critical pharmaceutical inputs, China's market share exceeds 99 percent. The United States imports over 90 percent of its antibiotics, including penicillin and streptomycin, from Chinese manufacturers.
In critical minerals, the concentration is even more pronounced. China controls an estimated 50 to 95 percent of global processing capacity for minerals like gallium, germanium, graphite, and rare earth elements — materials essential for everything from electric vehicle batteries to defense systems. When China restricted rare earth exports to Japan in 2010 over a territorial dispute, it demonstrated a willingness to weaponize supply chain dominance. That willingness has only grown more explicit in the years since.
The U.S.-China Economic and Security Review Commission has repeatedly flagged these dependencies as national security vulnerabilities. The commission's assessment is blunt: the concentration of critical chemical and material supply chains in a single geopolitical rival represents a strategic risk that the United States has been slow to address.
The Reshoring Challenge
Rebuilding domestic chemical manufacturing capacity is not a matter of simply flipping a switch. The United States didn't lose these supply chains overnight, and it won't rebuild them overnight either.
McKinsey estimates that closing the semiconductor chemical supply gap alone will require approximately $9 billion in capital expenditures by 2030. That figure covers new production facilities, purification infrastructure, and the specialized equipment needed to meet the exacting standards of advanced chip fabrication. It does not account for the workforce that will need to operate these facilities — a workforce that, in many cases, does not yet exist.
The American Chemistry Council projects that U.S. chemical production volumes grew by roughly 1.9 percent in 2025, a modest recovery after two years of decline. Chemical capital expenditures are expected to grow by 3.2 percent. But these aggregate numbers mask important details. Growth has been concentrated in specialty chemicals, which posted 4.3 percent gains, while basic chemicals — the building blocks of industrial supply chains — managed only 0.1 percent growth. Plastic resins actually declined slightly.
There are promising signs. In Phoenix, Taiwan-based Sunlit Chemical began construction on a $100 million facility to produce hydrofluoric acid for semiconductor manufacturing, strategically located near TSMC's new fabrication plant. Air Liquide announced a $60 million investment to supply ultra-high purity gases to a semiconductor manufacturer in the same region. GlobalFoundries committed $16 billion to expand chip manufacturing and advanced packaging in New York and Vermont.
But individual investments, however large, do not constitute a supply chain. A supply chain is an ecosystem — raw material extraction, processing, purification, logistics, quality assurance, and the deep institutional knowledge that comes from decades of continuous operation. China and Japan built their chemical supply chain dominance over 30 to 40 years. The United States is trying to catch up in a fraction of that time.
The Green Chemistry Opportunity
Here is where the story takes a turn that we at the EPR Foundation find genuinely encouraging. The push for manufacturing independence is converging with the push for safer chemistry — and the result could be a domestic chemical industry that is not only more resilient but fundamentally better.
Consider PFAS. Per- and polyfluoroalkyl substances have been used for decades in semiconductor manufacturing, firefighting foam, nonstick coatings, and hundreds of other applications. They are also persistent environmental contaminants that accumulate in human blood, contaminate drinking water, and resist degradation for centuries. As the United States phases out PFAS — 3M has committed to discontinuing all PFAS production — the country faces a choice: import replacement chemicals from overseas, or invest in developing and manufacturing safer alternatives domestically.
The science is advancing rapidly. Researchers at Northwestern University have developed a graphene oxide solution that provides water and oil resistance comparable to PFAS-based coatings, but is compostable and non-toxic. Nanofiber-based materials are replacing fluorinated compounds in filtration and textile applications. Silicone-based and bio-based coatings derived from cellulose and plant oils are proving viable in food packaging and consumer products. The U.S. Department of Defense ceased procuring PFAS-containing firefighting foams in October 2023, creating immediate demand for fluorine-free alternatives.
These are not laboratory curiosities. They are market-ready innovations, many of them developed at American universities and commercialized by American startups. The question is whether the manufacturing infrastructure will follow the science — or whether production of the next generation of safer chemicals will migrate overseas the way production of the last generation did.
What Smart Policy Looks Like
The CHIPS Act was an important first step, but its focus on semiconductor fabrication plants — the fabs — left a gap in the upstream supply chain. Building a $20 billion chip factory that depends on imported chemicals does not solve the vulnerability problem. It just moves it one link back in the chain.
Effective policy for chemical supply chain independence needs to address several realities simultaneously. First, it must account for the total cost of ownership in sourcing decisions, not just unit price. When companies factor in freight, tariffs, quality variability, and the revenue impact of supply disruptions, domestic sourcing often becomes competitive. Second, it must invest in workforce development — the skilled operators, chemists, and engineers who will run these facilities. Manufacturers consistently rank workforce availability as the single biggest barrier to reshoring. Third, it must recognize that environmental regulation and manufacturing competitiveness are not inherently opposed. The countries that develop cleaner production methods first will own the markets of the future.
The United States has structural advantages in this effort. Abundant domestic shale gas provides lower energy and feedstock costs than most competitors. A deep university research ecosystem generates world-class chemistry and materials science. Federal incentive structures — including advanced manufacturing investment credits recently increased from 25 to 35 percent — are beginning to shift the economic calculus.
Where We Stand
At the EPR Foundation, we believe that manufacturing independence and environmental responsibility are not competing priorities. They are, in the most practical sense, the same priority. A domestic chemical supply chain built on green chemistry principles — safer materials, cleaner processes, reduced waste — is inherently more resilient than one that replicates the environmental mistakes of the past.
The window for action is narrow. Semiconductor fabs currently under construction will reach full production within the next two to four years, and the chemicals they need will come from somewhere. The critical minerals required for the energy transition will be processed somewhere. The pharmaceutical ingredients that keep Americans alive will be manufactured somewhere. The question is whether that somewhere will include the United States — or whether we will continue to outsource our most critical supply chains to countries that may not always be willing to sell.
We did not arrive at this dependence by accident. We arrived here through decades of decisions that prioritized short-term cost savings over long-term resilience. Reversing that trajectory will require sustained investment, smart regulation, and the recognition that the chemistry undergirding modern life is too important to leave to chance — or to someone else.