The Sovereignty of Chips: How the Semiconductor Race Is Redefining Global Power

By Arnav Sharma Jan. 13, 2025

For most of modern history, territory determined power. Today, it’s lithography machines. The semiconductor—smaller than a fingernail, thinner than a hair—has become the cornerstone of economic sovereignty and military strategy alike. In 2025, the global semiconductor market reached US$640 billion, yet fewer than five nations control the capacity to manufacture cutting-edge chips under 5 nanometers, according to the OECD Technology Sovereignty Index (2025).

What began as an engineering contest has evolved into a new Cold War. The front line is silicon.

The Anatomy of Dependence

Modern economies cannot function without semiconductors. Every car, phone, factory robot, missile, and satellite depends on them. Yet production remains astonishingly concentrated. Taiwan’s TSMC manufactures over 57 percent of global advanced chips; Samsung Electronics follows with 18 percent. The rest of the world—Europe, India, even the United States—depends on a handful of East Asian fabrication plants.

The World Bank Supply Chain Risk Report (2025) estimates that a one-month disruption in Taiwan’s semiconductor exports would erase US$490 billion in global GDP. In an era where chips are the new oil, dependency is the new vulnerability.

The Geopolitics of Lithography

At the heart of the semiconductor supply chain lies a single Dutch company: ASML. Its extreme ultraviolet (EUV) lithography machines—each costing over US$200 million—are required to produce chips smaller than 5 nanometers. The MIT Center for Industrial Technology (2025) notes that only 140 such machines exist worldwide, all licensed under U.S.-Dutch export controls.

This choke point gives Washington and The Hague extraordinary leverage. When the United States restricted ASML’s sales to China in 2023, China’s leading chipmaker, SMIC, lost 40 percent of its production capacity within six months (Brookings Semiconductor Policy Review, 2025).

In the 20th century, power was measured in missiles. In the 21st, it is measured in nanometers.

Silicon Diplomacy

Semiconductors have become the new language of diplomacy. Japan, South Korea, and the United States established the “Chip 4 Alliance” in 2024 to secure critical supply chains. Meanwhile, the European Union’s Chips Act allocated €43 billion in subsidies to build local fabrication plants.

Yet these moves also fragment the global economy. The London School of Economics Trade Fragmentation Study (2025) warns that duplicating semiconductor supply networks could raise global chip prices by 35 percent and reduce innovation efficiency by 18 percent.

Economic decoupling, even when strategic, is not free—it is inflationary.

China’s Silicon Nationalism

China’s strategy, known as “self-sufficiency through scale,” has mobilized over US$150 billion in state funding to build domestic fabs, design tools, and rare earth supply chains. The Carnegie Endowment for International Peace Semiconductor Outlook (2025) reports that China has doubled chip output since 2020, but still lags two generations behind leading-edge technology.

Beijing’s challenge is not capital—it’s lithography. Without access to EUV technology, China must rely on less efficient deep ultraviolet (DUV) processes. The result: greater energy use, lower yields, and geopolitical frustration.

Every embargo accelerates the very independence it seeks to prevent.

America’s Industrial Reawakening

In response, the United States launched the CHIPS and Science Act (2022), channeling US$52.7 billion into domestic manufacturing. Intel’s new fabs in Ohio and Arizona, along with TSMC’s Phoenix facility, symbolize a shift from design dominance to production sovereignty.

Yet the Harvard Kennedy School Industrial Competitiveness Report (2025) warns that labor shortages and permitting delays could push U.S. fabs two years behind their production targets. Meanwhile, subsidies risk becoming permanent fixtures rather than temporary catalysts.

America may be rebuilding its factories—but not yet its workforce.

The Hidden Battle: Supply Chain Minerals

Every chip depends on obscure minerals: gallium, germanium, and rare earth elements. China controls 70 percent of global output, giving it quiet leverage over Western chip ambitions. When Beijing restricted gallium exports in 2023, global chip production costs spiked 14 percent, according to the World Trade Organization Mineral Supply Brief (2025).

The new energy war is not fought over oil tankers but mining permits.

The Cost of Precision

Semiconductor production is among the most resource-intensive processes ever invented. A single advanced chip fab consumes 10 million liters of water per day—as much as a city of 50,000 people. The International Energy Agency Semiconductor Sustainability Audit (2025) found that global chip production emits 86 million tons of CO₂ annually, roughly equivalent to Belgium’s total emissions.

The race for smaller transistors is, paradoxically, generating bigger environmental footprints.

The Future of Silicon Sovereignty

Economists warn that semiconductor nationalism could fracture the global innovation ecosystem. Open research consortia, such as Imec in Belgium and TSMC’s OIP alliance, rely on transnational collaboration. If export controls escalate, knowledge itself becomes weaponized.

The OECD Technological Fragmentation Index (2025) predicts that sustained tech decoupling could slow global semiconductor innovation by 29 percent by 2035, with ripple effects across AI, electric vehicles, and quantum computing.

The greatest casualty of the chip war may not be supply—it may be speed.

The Moral Geometry of the Silicon Age

Semiconductors are not just hardware; they are the physical form of globalization. Every chip embodies the collaboration—and the coercion—of hundreds of nations. As governments scramble to “de-risk” supply chains, they risk unmaking the very interdependence that built modern prosperity.

In the end, the question is not whether the world will have enough chips—but whether it will have enough trust to keep making them together.

Works Cited

“Technology Sovereignty Index.” Organisation for Economic Co-operation and Development (OECD), 2025.

 “Supply Chain Risk Report.” World Bank, 2025.

 “Center for Industrial Technology Report.” Massachusetts Institute of Technology (MIT), 2025.

 “Semiconductor Policy Review.” Brookings Institution, 2025.

 “Trade Fragmentation Study.” London School of Economics (LSE), 2025.

 “Semiconductor Outlook.” Carnegie Endowment for International Peace, 2025.

 “Industrial Competitiveness Report.” Harvard Kennedy School, 2025.

 “Mineral Supply Brief.” World Trade Organization (WTO), 2025.

 “Semiconductor Sustainability Audit.” International Energy Agency (IEA), 2025.

 “Technological Fragmentation Index.” Organisation for Economic Co-operation and Development (OECD), 2025.