The microchips that power modern civilization, providing intelligence to everything from mobile phones to medical scanners, are facing increasing vulnerabilities. And while the impact on general consumers might come to mind first, the overlooked effect on the public sector could be catastrophic.
In fact, semiconductors underpin virtually every critical system, from hospitals to transport networks, emergency services and power grids. Without urgent action, procurement teams risk a crisis that could compromise government services that millions of people depend upon daily, and can’t control.
Semiconductor manufacturing represents one of globalization’s most precarious bottlenecks. Taiwan alone produces over 90% of the world’s most sophisticated chips, an industry that accounts for 13% of the island’s GDP. This geographic concentration creates extraordinary vulnerability: Almost every hospital scanner, traffic management system and emergency response network worldwide relies on production facilities in a single, geopolitically contested region.
The manufacturing of advanced semiconductors demands ultra-clean environments, uninterrupted power, precision equipment and highly specialized personnel. Disrupting any of these elements can halt output for months, if not years. In the increasingly uncertain geopolitical context, the “broken nest” concept, developed by Jared M. McKinney and Peter Harris, is having a comeback. Applied to semiconductors production in Taiwan, this means that the island might deliberately destroy its semiconductor stock rather than allow it to fall into an adversary’s hands during conflict. Such “deterrence by denial” may serve Taiwan’s interest, but effects on the global supply chain would, without a doubt, prove catastrophic.
Public Services Face Disproportionate Risk
Semiconductor scarcity would certainly disrupt consumer markets, but the impact on public sector would affect everything from water treatment and environmental monitoring to transport signaling, air traffic control, data centers and digital platforms supporting government, defense, emergency response and border security. The problem extends beyond mere dependence, as chips sit several tiers up complex supply chains, embedded within larger systems. This creates opacity for public sector procurement teams and generates false confidence.
Additionally, due to rigid budgetary constraints, public institutions can’t respond to advanced components scarcity by outbidding competitors as private sector companies would typically respond. Decades of procurement reform prioritizing efficiency, competition and cost reduction have failed to recognize that continuity itself constitutes value. As a result, traditional frameworks optimized for steady conditions are at risk to collapse when markets tighten, leaving public bodies unable to secure supply precisely when it matters most.
Without access to advanced semiconductors, infrastructure upgrades get postponed indefinitely, maintenance cycles stretch beyond safe limits, legacy systems run without vendor support and overall digital transformation stalls. Eventually, procurement teams are forced to decide which services to prioritize, but those decisions should not be made during a crisis. They require advance planning, clear frameworks and strategic intelligence — precisely what current public sector procurement lacks.
A Framework for Action and Resilience
Public sector procurement teams need to develop the ability to navigate semiconductor and rare component scarcity.
This involves deep dependency mapping that traces semiconductor resilience across all supplier tiers, not merely direct contractors. Where exactly do chips sit within the systems supporting critical services? Which components come from which manufacturers? What alternatives exist, if any?
Procurement must also conduct rigorous criticality assessments determining which systems are genuinely mission-critical, and which can tolerate temporary degradation. Not all services are equally important during a crisis, and clearly established prioritization frameworks prevent bad decisions from being made under pressure.
Teams should implement early warning systems that monitor broad supply chain indicators by tracking geopolitical developments, industrial conditions, semiconductor production capacity, export controls and even insurance market signals. Integrating these alerts into procurement dashboards transforms abstract risks into intelligence.
In addition, organizations must validate alternative suppliers and components, understanding the regulatory, technical and timing constraints involved in switching providers. This can’t be done during a shortage — it requires thorough preparation and examination of compatibility, certification requirements and integration challenges.
Appropriate stockpiling levels for critical components should also be determined. This needs to take into account a range of factors such as storage limitations, obsolescence risk and refresh cycles, in addition to prioritizing components with lead times exceeding 12 months, where supply interruptions would prove most devastating.
Finally, accountability mechanisms must be established, assigning senior responsibility for supply chain resilience, with plans reviewed annually and integrated into broader business continuity and emergency response frameworks. However, this can’t remain a technical concern buried in procurement departments; it requires board-level visibility and ownership.
Major semiconductor disruption may never materialize, but if it does, public inquiries won’t debate whether the crisis was foreseeable, but whether reasonable preparatory steps were taken.
Mark Robert is public sector director at Jaggaer.