---

1. Introduction #

As artificial intelligence becomes central to national priorities, countries must invest in AI and data infrastructure built on open architectures and diverse semiconductor ecosystems. The global semiconductor supply chain has emerged as a critical battleground for technological sovereignty, with nations recognizing that control over chip design, fabrication, and advanced packaging is essential for economic security and military advantage. This article examines the geopolitical dynamics of the semiconductor sovereignty race, focusing on how AI chip infrastructure has become a strategic national asset and what policies are shaping the future of global semiconductor competitiveness.

2. The Strategic Importance of Semiconductors in the AI Era #

2.1 Semiconductors as Critical National Infrastructure #

Production facilities for semiconductors, necessary machinery, or the processing of production materials should be recognized as part of national critical infrastructures. As Germany and the EU have already recognized semiconductors and AI as critical infrastructure, other nations are following suit. The strategic importance stems from the fact that modern AI systems require specialized semiconductors that are produced through a globally fragmented and geopolitically sensitive supply chain.

2.2 AI Chip E[REDACTED]rt Controls and National Security #

The United States has initiated controls targeting AI chip e[REDACTED]rt particularly since the second half of 2024, recognizing that advanced semiconductors are not just commercial products but tools of national power. The Bureau of Industry and Security (BIS) has issued multiple rounds of e[REDACTED]rt controls, including:

• October 2022 controls targeting advanced semiconductor manufacturing equipment
• October 2023 clarifications on technology restrictions
• April 2024 updates addressing workarounds
• December 2024 expansion of controls to include AI model weights
• January 2025 Framework for Artificial Intelligence Diffusion (AI Diffusion Rule) set to take effect May 15, 2025

These controls aim to curtail PRC design firms’ ability to send advanced chip design files to foundries outside the PRC and restrict access to computing resources that directly undermine U.S. military and technological advantages.

2.3 The AI Diffusion Rule and Global Implications #

The AI Diffusion Rule, issued on January 15, 2025, with compliance requirements set to come into effect on May 15, 2025, represents a significant expansion of U.S. e[REDACTED]rt control authority. Per this version of the rule, U.S.-origin integrated circuits includes any such chips manufactured with U.S. machines, meaning that effectively all chips on earth are considered U.S. origin. This authority was also central to the e[REDACTED]rt control updates issued in January 2025.

The rule expanded the Foreign Direct Product Rule (FDPR) to include AI model weights, creating a framework where even chips manufactured abroad using U.S. equipment fall under U.S. jurisdiction. This approach has significant implications for global supply chains and has prompted allied nations to develop their legal authorities to implement these controls.

3. Global Semiconductor Market Dynamics #

3.1 Foundry Market Leadership #

In the global semiconductor foundry market, Taiwan Semiconductor Manufacturing Company (TSMC) maintains dominant position. In the first quarter of 2024, TSMC recorded a market share of 61.7 percent, while Samsung occupied 11 percent. More recent data shows TSMC’s market share strengthening to 64% in Q3 2024, while Samsung’s share has slightly declined to 9.3%.

When measured by foundry revenue, TSMC controls approximately 70% of global foundry revenue, far ahead of Samsung at 7%. This concentration creates strategic vulnerabilities for nations seeking semiconductor sovereignty.

3.2 Geographic Concentration Risks #

Asia Pacific was the top performer of the global semiconductor market by capturing 72.1% of the market share in 2025. The semiconductor industry’s market cap has surpassed $12 trillion in 2025, reflecting its critical role in training and deploying artificial intelligence systems. However, this concentration creates geopolitical risks:

• Over 80% of advanced semiconductor manufacturing occurs in Taiwan (TSMC) and South Korea (Samsung)
• China accounts for approximately 15% of global semiconductor manufacturing capacity
• The United States represents about 10% of global semiconductor fabrication capacity
• Europe’s share remains below 10% despite the EU Chips Act investments

4. National Strategies for Semiconductor Sovereignty #

4.1 United States Approach #

The United States has employed a range of economic security tools to restrict China’s access to advanced semiconductor technologies while simultaneously investing in domestic capacity. Key initiatives include:

• CHIPS and Science Act providing $52 billion in semiconductor subsidies and research funding
• E[REDACTED]rt controls on advanced semiconductors and semiconductor manufacturing equipment
• Executive Order 14105 (August 2023) restricting U.S. investments in Chinese semiconductor, quantum computing, and AI sectors
• Development of trusted foundry programs through the Department of Defense

4.2 European Union Strategy #

The EU Chips Act, designed to ensure Europe’s “strategic autonomy” and sovereignty by enabling a secure supply of critical chips, aims to double EU chip market share by 2030 through €43 billion in public and private investments. However, expert audits warn that sub-7 nm capacity cannot be achieved in time, meaning next-generation AI hardware will remain predominantly offshore.

4.3 China’s Self-Reliance Efforts #

China launched national strategies such as Made in China 2025, aiming to achieve self-sufficiency in high-tech industries. By 2024-2025, the effort expanded to European and Middle Eastern partners through multilateral restrictions coordinated by the US Department of Commerce and supported by its allies, establishing a unified framework to limit China’s technological access while simultaneously pursuing indigenous innovation.

4.4 Taiwan’s Strategic Position #

Taiwan’s semiconductor industry, particularly TSMC, occupies a unique geopolitical position. As the world’s leading advanced semiconductor foundry, TSMC’s facilities represent both a critical asset and a potential flashpoint in U.S.-China tensions. The concept of “silicon shield” suggests that TSMC’s importance provides a deterrent against military action, though this remains untested.

5. Supply Chain Vulnerabilities and Resilience #

5.1 Current Supply Chain Challenges #

Infrastructure costs, geopolitical events, increased vulnerability to natural disasters, and natural resource and talent shortages contribute to ongoing difficulties even as the global semiconductor supply normalizes. With escalating trade restrictions on critical next-gen AI chip technologies, leaders should adapt quickly to make supply chains more resilient.

5.2 Economic Security Considerations #

Discussions of different aspects of economic security, such as supply chain resilience, energy security and cybersecurity, have intensified in recent years. The OECD has organized workshops on Economic Aspects of National Security to address these interlinkages and foster synergies between different expert communities.

5.3 Technological Workarounds and Adaptations #

There have been reports of companies recalculating chip features to fall below e[REDACTED]rt control thresholds. For example, CXMC reportedly recalculated its chip features to fall below BIS’s October 2022 controls. Additionally, there have been reports of U.S. firms violating controls, with the Department of Justice investigating potential sales of semiconductor manufacturing equipment to SMIC via subsidiaries in third countries.

6. The Future of Semiconductor Sovereignty #

6.1 Technology Leadership Competition #

The competition for control over the infrastructure, data, and design of technology reflects broader debates over sovereignty by countries wishing to control their own affairs. As the U.S.-China rivalry intensifies through sanctions, infrastructure investments, and e[REDACTED]rt controls, Europe faces strategic dependency due to limited domestic AI chip production.

6.2 Policy Recommendations #

To prevent the loss of influence in a rapidly evolving AI-driven global security landscape, policymakers should:

1. Strengthen semiconductor sovereignty through targeted investments in domestic capabilities
2. Protect critical assets by recognizing AI as critical infrastructure
3. Diversify supply chains to reduce geographic concentration risks
4. Invest in next-generation technologies beyond current nodes (sub-2nm, advanced packaging)
5. Develop trusted partnerships with allied nations for secure semiconductor access
6. Balance security concerns with innovation needs to maintain technological leadership

6.3 Market Outlook #

TSMC is expected to maintain 60-65% share of the foundry market through 2030, with sub-2nm technology potentially growing to 70% of the advanced market by 2028. The global semiconductor race will continue to be shaped by the intersection of technological innovation, national security imperatives, and economic statecraft.

7. Conclusion #

The semiconductor sovereignty race represents a fundamental shift in how nations view technological assets in the AI era. No longer are semiconductors merely commercial components; they have become strategic national assets crucial for economic security, technological sovereignty, and military advantage. As governments pour billions into AI-driven semiconductor resilience, the global landscape is transforming from laissez-faire approaches to strategic industrial policy.

The outcome of this race will determine not only which nations lead in AI development but also which countries can maintain strategic autonomy in an increasingly technology-dependent world. Success will require balancing security concerns with innovation incentives, fostering trusted international partnerships, and investing in both current-generation and next-generation semiconductor technologies.

Source^[1] Source^[2] Source^[3] Source^[4] Source^[5] Source^[6] Source^[7] Source^[8] [9]

See also: Defense Industry AI Transformation: How Military Contractors Adopt Explainable AI^[10] The AI Transparency Divide: How Explainability Creates Competitive Advantage in Geopolitics^[11]