Building a Semiconductor Empire: What strategies can be implemented in response to the issues that arises with these empires

How are different major powers such as China, US and Europe pursuing semiconductors automation and the impacts of such movements on global innovation policies, what collaborative strategies can the government use to respond to this?

Introduction

Semiconductors are the backbone of modern technology as they power the majority of the devices that are used such as smartphones, medical devices and AI chips. These components are tiny yet extraordinarily complex. Made from materials like silicon that can both conduct and insulate electricity, semiconductors can process, store, and transmit information. Their fabrication requires exceptional precision across hundreds of steps, meaning only highly specialised firms can produce them. As a result, no country currently has a fully self-sufficient semiconductor supply chain. Instead, the industry is globally interdependent and therefore, highly vulnerable to geopolitical shocks.

This growing fragility has prompted nations to race toward semiconductor independence to secure their domestic supply chains. This commentary examines the sovereignty strategies adopted by major powers such as China, the United States, and Europe; evaluates their impacts on global innovation networks; and assesses how governments can balance technological autonomy with international collaboration.

National Strategies for Semiconductor Sovereignty

The CHIPS and Science Act (USA): Passed in 2022 commits $52.7 billion to boost domestic production of semiconductors to build supply-chain resilience. PwC reports that about $39 billion supports fabrication facilities, with $2 billion reserved for mature-node chips vital to defence and automotive sectors. Additionally, the Peterson Institute for International Economics also found that the Act also restricts recipients from expanding manufacturing in “countries of concern,” such as China, to further reinforce broader U.S. export controls on advanced chips and equipment.

Five-Year Plans (China): China has prioritised semiconductor autonomy through a

techno-nationalist strategy. Under the 14th Five-Year Plan, the state-backed “Big Fund” invested heavily in chip design, memory production, and local equipment development. While China still lags in advanced logic manufacturing and EUV lithography, it dominates downstream activities, controlling 38 percent of the global ATP market and filing over 55 percent of global semiconductor patents in 2021–2022 Mature-node capacity is expected to rise from 31 percent in 2023 to 39 percent by 2027, and integrated circuit output has grown 72.6 percent since the 13th Five-Year Plan. The 15th Five-Year Plan aims to increase vertical integration and diversify trade to reduce geopolitical risk and support domestic R&D.

The European Chips Act (Europe): Passed in 2023, commits €43 billion to strengthen Europe’s semiconductor ecosystem, aiming to increase its global market share from 10 to 20 percent by 2030. Under Pillar II, which focuses on supply security and resilience, seven state-aid projects have been approved, totaling over €31.5 billion in combined public and private investment for first-of-a-kind fabrication plants . Europe’s semiconductor sector directly employs around 200,000 people and indirectly supports up to 1 million jobs across micro and nano-electronics industries.

The Problems of Semiconductor Sovereignty on Global Innovation Networks

Building a self-sufficient supply chain of semiconductors significantly enables domestic technology manufacturing, research and development security. However, having major powers actually achieving this also has its problems. 

Sovereignty-centered industrial policies can increase duplication and inefficiency: BCG reports that geographically concentrated production yields high efficiency through increased scale and specialisation globally. However, as countries are all racing to build their own semiconductors supply chain, this parallel raises costs globally and reduces the incentive to pool research and development across borders.

Export controls and supply-chain segmentation challenge research collaboration: US Chips Acts that restrict manufacturing in “countries of concern” could raise costs and risk fragmenting global innovation networks. This limits international research partnerships and reduces knowledge-sharing, potentially fragmenting global innovation networks. This can also widen the development gap between developing and developed countries.

Further strain on tensions between major powers such as China and USA: As countries are racing to achieve domestic semiconductors security through trade controls, this poses further tensions between them which further limits research partnership. 

Policy Recommendations 

Promote Multilateral Research Consortia: Governments should establish international consortia focused on R&D of semiconductors, where shared initiatives avoid duplication and allow smaller or emerging players access to advanced expertise. This helps preserve global innovation networks, ensuring knowledge in modern technology is shared across borders. Thereby, reducing fragmentation and maintaining the efficiency and innovation potential of the global semiconductor ecosystem. 

Facilitate Talent Mobility and Knowledge Sharing: Governments should support cross-border exchange programs, fellowships, and temporary visas for semiconductor researchers and engineers. This maintains a globally connected talent pool, allowing best practices and technical knowledge to circulate efficiently. It reduces the risk of isolation caused by sovereignty-driven restriction, supports workforce development in emerging regions which helps to reduce the wealth gap across the world. 

Implement Targeted and Flexible Export Controls: Governments should adopt narrow, adaptable export controls that protect strategic technologies while allowing collaboration with trusted partners. Coordinated controls means the domestic export market suffers less through potential retaliation, protectionist measures coming from other countries whilst further incentivising more innovation through collaboration between nations. Thus, reducing political tensions.

Conclusion 

Semiconductors are fundamental to modern technology, and achieving security in their supply chains ensures stability for downstream applications and supports research and development in emerging technologies such as AI. Securing domestic semiconductor production reduces vulnerability to external shocks. However, this pursuit of sovereignty can create global tensions and inefficiencies, as countries compete to build independent supply chains. Consequently, governments should focus on policies that promote international collaboration through multilateral R&D consortia, facilitate talent mobility and implement more flexible export controls to create a more resilient, efficient and interconnected global semiconductor innovation system while balancing national security priorities.

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