With all that is at stake, why haven't we diversified chip production?

But... It is being diversified. Europe, the US, Japan et al. are all scrambling to give subsidies and tax breaks to the means of TSMC, Samsung, and Intel for more local factories.

The thing is, chip fabrication is hard. Really hard. Among the hardest thing human beings have ever achieved and only getting harder on the leading edge nodes. There are very few people with the expertise, very few suppliers of the tools, huge costs, and huge risk if something doesn't go well. Intel made some wrong technical bets on their 10nm node and they are still catching up years later.

But that's at the leading edge. The real meat and potatoes chips that aren't being used for high performance computing or slightly slimmer iPhones are made all over the place by lots of different companies.

The same applies to airplanes with two large companies being dominate: Boeing and Airbus.

Further examples: Search engines, operating systems (particularly mobile) … in many areas we face a monopoly or duopoly.

The more complicated the product, the higher the risk that a monoculture is created.

What’s the context here? The US’s increasingly adversarial relationship with China?

We are a capitalist society so we do not like spending too much money in things that are not either clear and immediate threats or stand to make rich people a lot richer relatively quickly.

It should be easy to argue that the chip situation is quite urgent given our over-reliance on computers but I guess there is not enough return yet to prompt action. It might even cost us to do something!