About this publication
This study analyzes the process by which semiconductor chips have shifted from an industrial commodity to an instrument of foreign policy and geopolitical rivalry. The report is built on three fundamental questions: first, the structure of the semiconductor supply chain and its points of vulnerability; second, how the US–China confrontation exploits these vulnerabilities to exert strategic pressure; and third, the strategies adopted by middle powers (including Taiwan, Europe, Southeast Asia, and the Persian Gulf states) to safeguard their national interests in this competitive environment. The findings indicate that the industry's chokepoints are simultaneously technological and physical in nature, and that states mainly use these constraints as "strategic bargaining chips" rather than as instruments of all-out war. Finally, the study examines the regional implications and formulates key indicators for monitoring future developments.
Analysis of Supply Chain Vulnerabilities: From Trade Tensions to Regional Conflicts
In autumn 2025, the slowdown of automobile production lines in Europe and Asia was the direct consequence of a shortage of components of negligible value. The root of this disruption was a legal dispute over the ownership of the Dutch-Chinese company "Nexperia," which led the Netherlands to impose temporary control and China to respond by halting exports of the chips produced by the company. Another example of this vulnerability appeared in March 2026, with the outbreak of military tensions in the Persian Gulf: damage to the Ras Laffan gas complex in Qatar disrupted the supply of helium, a gas vital to the wafer fabrication process in South Korean and Taiwanese plants and one for which substitutability is very limited. These two events show that in the semiconductor industry, power lies not only in the ownership of advanced technology but is also manifested in control over the key, irreplaceable links of the supply chain.
Between 2022 and 2026, the semiconductor industry underwent a paradigmatic transformation: it moved out of the margins of industrial policy and became the central core of states' diplomatic and security policies. Focusing on the strategies of non-superpower actors in managing this crisis, this report examines the new nature of power in the digital age. The analytical foundation of this paper is the concept of "weaponized interdependence," which rests on the principle that, in globally connected networks, power lies not only in production but in control over the pathways of flow (Flows) and the key points of the network (Network Chokepoints). This structure enables key actors to convert economic dependencies into instruments of political pressure.
This study adopts a descriptive-analytical approach and was prepared through documentary analysis. The main sources comprise official documents, industry reports, and credible strategic analyses covering the period from 2022 to September 2026. In this paper, figures are used to clarify trends rather than as the main focus. The analysis was carried out in four stages: first, an examination of the industry's structure; second, an analysis of the China–US strategic competition; third, a review of the position of coalitions and middle powers; and fourth, an assessment of physical shocks and their security and regional implications.
1.1. Structural Analysis and Strategic Chokepoints of the Semiconductor Industry
The global market value of semiconductors reached nearly $800 billion in 2025, and this figure is projected to rise to about $1.5 trillion in 2026. The main driver of this accelerating growth is the development of artificial intelligence infrastructure. It should be noted, however, that part of this price jump stems from a rise in the nominal value of products and from the inflation rate in the technology sector, and therefore does not necessarily reflect an increase in production volume alone.
In analyzing the structure of this industry, it is necessary to identify several strategic points of concentration (Nodes) on which global dependence is vital. The first is production concentration in Taiwan: TSMC, which manufactures the bulk of the world's most advanced chips (especially those needed for artificial intelligence processing), accounts for more than half of the revenue from contract manufacturing worldwide. Although the accuracy of these statistics depends on the operational definition of the word "advanced," and some analysts raise the possibility that commonly cited figures are exaggerated, for the purposes of this study a precise delineation of the technological scope matters more than the figure itself.
The second point is the monopoly over fabrication equipment (Lithography). The Dutch company ASML is the world's only supplier of advanced extreme ultraviolet (EUV) lithography machines. The export restrictions imposed on China have altered this company's sales pattern: China's share of its sales has fallen from about one-third to about one-fifth, and sales to that country have been confined to older machines.
The third point is electronic design automation (EDA) software, a field in which three Western companies, Synopsys, Cadence, and Siemens EDA, hold an almost absolute dominance of the market. The strategic use of these chokepoints as "bargaining leverage" became visible in 2025, when the United States announced that the sale of this software to China would be conditional on special licenses. Yet only five weeks after this measure, in the course of trade negotiations, the restrictions were eased. This episode showed that tools which had the potential to paralyze China's production chain were quickly turned into instruments of pressure and management at the negotiating table.
2.1.Redefining US Strategy: From Absolute Restriction to Conditional Management
Since 2022, US policy toward China has been built mainly around "deterrence," a goal pursued by imposing stringent restrictions on China's access to advanced semiconductor technologies. Over the past year, however, we have witnessed a shift in this paradigm. In December 2025, the Trump administration approved the sale of NVIDIA's H200 chips to vetted customers in China, and the US Department of Commerce subsequently formalized the case-by-case licensing process. Some reports indicate that this change of approach was made with the aim of preserving part of the revenue stream for the US government and exercising more precise control over trade routes.
The consequences of this policy change have been heterogeneous and complex. On the one hand, NVIDIA stresses in its annual reports that it has effectively been pushed out of China's data center market, because a product that simultaneously meets Washington's security standards and Beijing's market needs is hard to offer. This shows that licenses issued by the United States, absent regard for Beijing's strategic considerations, have little operational effectiveness in the Chinese market.
On the other hand, the United States is simultaneously trying to close the routes of circumvention (Circumvention). In June 2026, it was announced that export restrictions also cover Chinese companies based outside the country's borders. This approach was put into operation in August 2026 with the accusation that a Chinese company had used banned chips through a data center in Thailand. In addition, proposals are under consideration in the US Congress aimed at restricting access to cloud services (Cloud Services) and the provision of software services for older equipment in China; however, these proposals have not yet reached the stage of enactment into law.
Overall, US strategy can be explained along three simultaneous tracks: first, using the "conditional opening of trade routes" as a tool for earning revenue and increasing influence; second, "closing the loopholes for circumventing restrictions" to preserve the effectiveness of security policies; and third, using these tools as "transactional levers" in negotiations with Beijing.
3.1. China's Counter-Strategies: Resource Control, Legal Confrontation, and the Transition to Self-Sufficiency
In response to technology restrictions, Beijing too uses its own strategic tools to exert counter-pressure. In October 2025, China imposed a set of export controls on strategic minerals whose scope extended beyond the country's own territory. After the meeting between Donald Trump and Xi Jinping in Busan, part of these measures, including the export ban on key metals such as gallium and germanium, which are vital in semiconductor manufacturing, was suspended until late November 2026. This suspension, however, should not be read as a repeal of the policy; rather, it functions as a "strategic pause" within the licensing framework (Licensing), enabling Beijing to reimpose stringent restrictions at any time. It is worth noting that the recent control measures against Japan in January 2026 remained exempt from this suspension and are still in force.
In the domain of corporate ownership and the supply chain, the Nexperia dispute shows the legal and political complexities of this confrontation. After the intervention of the Dutch government and Beijing's counter-reaction, the dispute was not resolved: the company's Chinese unit turned to domestic sources for its wafer supply, which created a legal rift and led the Chinese owner to file a complaint in Dutch courts. This episode illustrates the fact that legal disputes at the level of international corporations can become a tool for structural rupture in the global supply chain.
Alongside exerting pressure, China pursues the long-term strategy of "technological self-sufficiency." Available reports indicate that the domestic development of lithography machines is advancing and that the first prototypes produced have been delivered to major domestic manufacturers. Nevertheless, domestic producers remain dependent on foreign components in sensitive areas such as lenses and light sources. Analysts believe that China, using a strategy of "retrofitting older equipment" (Retrofitting), is trying to reach technologies close to the advanced frontier; yet these claims call for a cautious view, since the transition from "prototype production" to "mass, cost-effective, and sustainable production" remains a fundamental challenge.
Finally, Xi Jinping's official visit to Washington in September 2026 indicates both sides' preference for "managing differences" over "direct confrontation." The extension of the trade truce until January 10, although a step toward easing tensions, is regarded by observers as a limited and experimental achievement, particularly as the joint official statements made no reference to the sensitive issue of Taiwan.
4.1. The Shift to Security Coalitions and the Redefinition of Industrial Policy
Under conditions of intensifying strategic competition, the formation of technology coalitions has become a necessity. The "Chip 4" coalition (comprising the United States, Taiwan, Japan, and South Korea), which was proposed in 2022, never became a formal, legal body, despite its theoretical importance, because the partners could not agree on executive structures and agendas. In its place, this vacuum was filled by the "Pax Silica" initiative, a program launched by the US Department of State in December 2025 with the aim of comprehensively covering the value chain, from raw materials and energy to chip manufacturing and artificial intelligence infrastructure. This coalition, which began with seven countries, experienced a significant expansion of its membership in 2026. Although Taiwan is not a formal member of the pact, it has accepted its operating principles through a separate statement. A point of importance from the geopolitical perspective is the joining of countries such as Qatar, the UAE, Bahrain, and Turkey to this coalition in 2026, which indicates the spread of the framework's influence in the Persian Gulf region.
At the same time, industrial policy has become one of the key instruments of diplomacy and hard power. In this regard, state support for the private sector can be seen to have changed its nature. For example, in return for the financial incentives provided for domestic semiconductor manufacturing, the United States took over a portion of Intel's shares, which indicates a shift from a "direct subsidy" model to a model of "state ownership or strategic control."
Another pattern of this same logic emerged in the January 2026 agreement between the United States and Taiwan. By committing to large-scale investments on US soil, Taiwan in return benefited from tariff ceilings and unimpeded-access privileges (Unimpeded Access) for companies with manufacturing infrastructure in America. Meanwhile, the European Union, by proposing the second version of the "Chips Act" (EU Chips Act) in June 2026, is attempting to reduce its strategic dependence on foreign supply chains by facilitating the manufacture of advanced technologies on European soil.
5.1. Intermediary States: Capital-Attraction Strategy and the Management of Compliance Risks
For developing countries, semiconductor diplomacy is centered mainly on competition to attract downstream infrastructure, including packaging, assembly, and testing (Back-end processes). In this regard, Malaysia holds a considerable share of the global packaging market, and Vietnam has also drawn up a long-term program for developing its value chain, from design and manufacturing to packaging centers. However, this process of attracting capital coincides with regulatory challenges: since July 2025, Malaysia has made the export and transit of US artificial intelligence chips subject to a licensing process, in order to prevent itself from becoming a route for circumventing export restrictions. This approach shows that states that host capital are compelled to play a role in enforcing the control protocols of other powers.
In the Persian Gulf region, another pattern of international interaction has emerged, which can be called "Computational Diplomacy." In this model, access to advanced computing power is an instrument for managing political relations. For example, in November 2025, the United States, imposing specific security requirements, allowed G42 in the UAE and HUMAIN in Saudi Arabia to purchase a considerable volume of NVIDIA's advanced chips. In July 2026, the UAE's strategic position in US export regulations was upgraded, and a list of Emirati companies was exempted from obtaining separate licenses.
However, these privileges are not permanent in nature and are conditional on compliance with cooperation standards. For example, the operating licenses of some Emirati companies have been issued on a temporary basis and, if the requirements relating to "company formation" or alignment with American standards are not met by the deadline, these licenses face the risk of expiry. This situation explains the fact that access to advanced computing technologies is a reward for "Strategic Alignment," one that is always subject to revision and adjustment.
6.1. Physical Chokepoints and Resource Security: A Case Analysis of the Helium Crisis
The helium crisis shows that supply chain chokepoints are not confined to the technological and policymaking dimensions but are rooted in geographic limitations and physical resources. Helium, which is extracted as a by-product of natural gas processing, is one of the vital resources for advanced industries, and Qatar is considered one of the world's largest producers. Although the available reports differ on the exact timing of the tensions (early or mid-March 2026) and on the magnitude of the reduction in global supply (with estimates ranging from one-tenth to one-third), the nature of the crisis is consistent: the failure of a strategic source led to a price shock and disruption in global markets. According to the estimates of Qatari companies, the full rebuilding of production capacity after such damage requires a period of between three and five years.
This crisis revealed "asymmetric" vulnerabilities at the global level. While South Korea sourced the major part of its helium needs from Qatar, Taiwan was likewise dependent on the states of the Persian Gulf Cooperation Council (GCC). In this context, TSMC, thanks to its several-month strategic reserves and advanced recycling systems, was able to manage the shock at a higher level; by contrast, Korean memory manufacturers, lacking similar cover, showed greater vulnerability.
From a theoretical standpoint, this event underscores the principle that "weaponized interdependence" (Weaponized Interdependence) is not merely the product of policymakers' decisions. Geopolitical factors and geographic turbulence can also create new chokepoints in the global supply chain, the management of which lies beyond political controls and falls solely within the domain of physical crisis management.
7.1. Iran's Strategic Challenges: Access Limitations and the Readiness Gap in the Region
For the Islamic Republic of Iran, the challenges in the fields of artificial intelligence and semiconductors are the product of the convergence of "sanctions pressures," "lack of access to official supply channels," and "a geopolitical position in a region embroiled in computational rivalries." Available reports indicate that, owing to export restrictions, domestic buyers are compelled to pay costs far above global prices in informal markets (Grey Markets) to obtain the chips they need. In addition to raising research and development costs, this has reduced the efficiency of the country's technology supply chain.
While the country's grand national goals are focused on reaching a position among the top ten artificial intelligence powers by 2032, comparative analyses show a meaningful gap in structural readiness. According to international indices of "Government AI Readiness," Iran's ranking, compared with the countries of the region, especially the United Arab Emirates and Saudi Arabia, shows a striking distance.
This difference in developmental trajectory stems from the adoption of different strategies by regional actors. While Iran's neighbors, through the "access in exchange for strategic alignment" model and by joining frameworks such as "Pax Silica," are institutionalizing legal and sustainable access to advanced technologies, Iran faces challenges relating to informal procurement and a lack of integration with global value chains. Although this analysis merely examines existing trends and structural differences, one cannot overlook the fact that differences in these developmental paths will have a direct and tangible impact on computing power and, consequently, on artificial intelligence development capacities across the entire region.
8. Conclusion and Strategic Outlook
An analysis of the trends of the past four years shows that the dynamics of the semiconductor field rest on three fundamental principles:
First, the semiconductor industry is defined by a structure of "mutual and irreplaceable chokepoints." The strategic concentration on key points, such as Taiwan's manufacturing capacity, Dutch lithography technology, design infrastructure in the West, and control of raw-material resources in China, has created a kind of structural interdependence, such that replacing any one of these components would carry a cost beyond the market's current capacity.
Second, control instruments and export restrictions, rather than having the nature of "permanent sanctions," function as "Strategic Bargaining Chips." The flexible and conditional nature of control measures, including the temporary suspensions of software restrictions or China's conditional licensing policies, indicates the use of technological restrictions to achieve political and economic objectives within specific time frames.
Third, the intermediary states in this confrontation play a role beyond that of victim or observer. By adopting hybrid strategies that include "attracting investment," "membership in conditional coalitions," and "formulating national industrial policies," these states are managing and upgrading their "strategic resilience," although this path requires accepting considerable political and regulatory costs.
8.1. Policy Recommendations
For countries located on the margins of this power network, three policy axes are proposed for risk management:
1. Comprehensive mapping of the supply chain: The focus on managing dependencies should not be confined to the level of the "chip" but should include close monitoring of the chain of raw materials, industrial gases, and sub-components (Sub-components).
2. Diversification and smart diplomacy: It is necessary to diversify supply routes and to calibrate relations with rival coalitions (such as Pax Silica and other frameworks) in such a way as to prevent absolute dependence on a single bloc.
3. Realism in dealing with conditional privileges: Access obtained through conditional licenses should not be treated as "permanent assets"; such access is transient in nature and always subject to change in protocols and political timetables.
8.2. Monitoring Indicators
In the period ahead, four key indicators should be continuously monitored to assess strategic shifts in direction:
• The status of China's export suspensions in the second half of November 2026, and the possibility of their extension or cancellation.
• The diplomatic outcomes of the APEC and G20 summits and their impact on extending the trade truce on January 10, 2027.
• The process of passage and implementation of US Congress proposals on lithography equipment and access to cloud computing infrastructure.
• The status of rebuilding strategic facilities in Qatar and its impact on the stability of the global helium supply.