Chips and AI are at the heart of the geopolitical conflict between the United States and China
The world is witnessing a radical shift in the nature of economic and geopolitical conflict, with advanced technology, specifically semiconductors and artificial intelligence, at the heart of the competition between the United States and China. This conflict is not merely a traditional trade rivalry over market share; it is an existential battle that is redrawing the global power map for decades to come. Controlling semiconductor supply chains means controlling everything from advanced military capabilities to global financial systems, and including the infrastructure of smart cities and advanced healthcare.
US chip law: A strategic weapon to curb Chinese technological superiority
The most significant American move in this context was the passage of the "Semiconductor and Science Act," which allocates hundreds of billions of dollars to encourage semiconductor manufacturing within the United States and its strategic allies, such as Taiwan, South Korea, and Japan. However, the most severe aspect of this law is the imposition of strict restrictions on the export of precision equipment and advanced technologies to China. The objective is clear and explicit: to prevent Beijing from acquiring the technology necessary to develop advanced weapons or sophisticated surveillance systems that could threaten the security of the United States and its allies. This policy is known as "the hedge of the garden," where Washington attempts to protect its technological advantage by restricting its main competitor's access to essential tools.
Chinese artificial intelligence is an existential threat to US national security
From a national security perspective, the United States views China’s rapid development of artificial intelligence (AI) as an existential threat to its military and economic supremacy. The application of AI in autonomous weapons, sophisticated cyber espionage, and strategic intelligence analysis transforms the technology race into a national security issue, not merely a commercial competition that can be resolved through negotiation. The annual US intelligence report warned that China could gain a lead in specific areas of AI within the next five years, a prospect that particularly worries the Pentagon regarding autonomous military capabilities.
China's response: Massive R&D Investment to overcoming Western restrictions
China’s response to this technological encirclement has been swift and multifaceted. Beijing has doubled its investment in domestic research and development, allocating hundreds of billions of yuan to build national capabilities in advanced chip manufacturing. However, given the significant technological gap, China has also resorted to unconventional methods to circumvent the encirclement, such as using shell companies in third countries to procure prohibited equipment, recruiting foreign engineers with exorbitant salaries, and even engaging in systematic industrial espionage. These efforts demonstrate the importance of this issue to the Chinese leadership, which considers technological self-sufficiency a prerequisite for achieving its stated strategic goal: to become the world's leading superpower by mid-century.
Global Semiconductor Supply Chains and the Taiwan Factor
However, this Chinese approach faces formidable challenges on the ground. Global electronics supply chains are complex and inextricably linked, with individual chips passing through multiple countries and dozens of companies before becoming a final product. Taiwan alone, through the Taiwan Semiconductor Manufacturing Company (TSMC), produces more than 90% of the world's advanced chips and is effectively under the implicit protection of the US military. China's attempt to build a fully domestic alternative could take a decade and cost trillions, with no guarantee of success given the complexity of the required technologies.
The Economic Cost of Sanctions: Risks to U.S. Tech Giants and Innovation
On the other hand, imposing strict restrictions carries significant economic risks for the United States itself. Major American companies like Nvidia, Apple, and Qualcomm rely heavily on the enormous Chinese market, which accounts for roughly 20% of their global revenue. A sudden loss of this market could lead to a collapse in these companies' stock prices, the layoff of thousands of employees, and a reduction in research and development spending, weakening American competitiveness in the medium term. Sanctions could also push China to invest more heavily in developing its own alternatives, and in the long term, could end American technological dominance in favor of a parallel Chinese system.
A Fragmented Digital World: The Rise of Competing Technology Blocs
This conflict is profoundly reshaping the global economy. The world is heading toward a fragmentation of the internet and technology into two separate camps: one led by the United States and its Western and Asian allies, and the other led by China, and perhaps Russia and some developing countries. This division will have profound implications for global innovation, as the pace of technological progress may slow due to duplication of effort and the failure to capitalize on economies of scale. It will also lead to higher technology prices for consumers, difficulties in harmonizing standards, and potentially instability in financial markets that invest heavily in the technology sector.
Countries Caught in the Middle: Balancing Washington and Beijing
Other countries find themselves forced to choose between the two camps, with some attempting to maintain balanced relationships. South Korea and Japan, for example, despite their security alliance with Washington, maintain substantial trade ties with Beijing. Europe, divided between Atlantic security interests and Chinese economic interests, is finding it difficult to formulate a unified position. This situation complicates efforts to build unified international technology policies and weakens the effectiveness of multilateral organizations.
Conclusion: How the U.S.–China Tech War Is Redefining Global Power
The technology war between Washington and Beijing is not merely a temporary wave of trade tensions, but a fundamental redefinition of the global economy and the distribution of power within it. Control over semiconductors and artificial intelligence has become more important than control over oil in the 20th century, because it determines the capacity for production, innovation, and security in the 21st century. The world we know, built on a unified global internet and integrated technology markets, is unraveling before our eyes, to be replaced by a multipolar system divided by technological and political barriers.
