The intricate dependencies woven into the digital technology value chain have made it a central theater of geopolitical competition. Nations are no longer content to let market forces determine the balance of power; instead, they are deploying industrial policies, subsidies, and regulations as active levers to reshape the global landscape in their favor. This strategic intervention is clearest in the race to re-shore and strengthen semiconductor manufacturing, with the United States, European Union, and China pursuing ambitious, state-supported strategies that are fundamentally altering the structure of global supply chains.
The United States: CHIPS Act and Industrial Policy
Legislative Framework
The CHIPS and Science Act of 2022 represents the most significant U.S. industrial policy initiative in the semiconductor sector's history. The legislation authorized $52.7 billion in incentives, with $39 billion targeted at boosting domestic chip manufacturing and R&D. This marks a dramatic shift from decades of free-market orthodoxy toward active state intervention in strategic industries.
Major Funding Recipients
The direct financial impact has been substantial:
- Intel: $19.5 billion in grants and loans, plus a 10% equity stake for the U.S. government, to build fabs in Arizona, Ohio, New Mexico, and Oregon
- TSMC: $6.6 billion in grants for Arizona fabs producing 4nm and 3nm chips
- Micron: Over $6 billion for memory chip fabs in New York and Idaho
- Texas Instruments: $4.6 billion in grants and loans for new facilities
- Samsung: $6.4 billion for Texas fab expansion
Strategic Objectives
The CHIPS Act aims to increase U.S. manufacturing capacity from 10% of the global total in 2025 to 14% by 2032. Beyond capacity, the act includes provisions for:
- Grants for semiconductor machinery and supply chain improvements
- R&D funding for next-generation technologies (2nm and beyond)
- Workforce development programs to train 50,000+ semiconductor technicians
- National security restrictions preventing recipients from expanding advanced capacity in China
💰 U.S. CHIPS Act Funding Allocation
European Union: Chips Act and Critical Raw Materials
EU Chips Act
The European Union is implementing its own strategy with the EU Chips Act, which aims to boost Europe's share of global chip manufacturing to 20% by 2030 (up from 9% in 2023). The act mobilizes €43 billion in public and private investment, focusing on:
- Advanced fab construction (Intel's €30 billion Germany facility)
- Research and innovation in next-generation technologies
- Strengthening the European semiconductor ecosystem
Critical Raw Materials Act
Recognizing that chips require more than fabs, the EU's Critical Raw Materials Act seeks to have 40% of the bloc's annual rare earth processing occur within the EU by 2030, reducing reliance on China. Key initiatives include:
- Solvay (France): New rare earth magnet production line
- Estonia: Europe's first rare earth separation facility opened in 2024
- Greenland: Exploration of massive REE deposits, though environmental concerns remain
China: Made in China 2025 and Self-Sufficiency
Strategic Goals
China is pursuing a classic industrial policy under its "Made in China 2025" strategy, which explicitly targets dominance in advanced manufacturing, including semiconductors. The government provides massive subsidies and support to domestic champions like SMIC, aiming to:
- Increase advanced process manufacturing share from 6% in 2023 to 8% by 2027
- Maintain 40% share of mature process market
- Achieve 70% semiconductor self-sufficiency by 2025 (currently ~16%)
Investment Scale
China has invested over $150 billion in semiconductor development since 2014 through:
- National Integrated Circuit Industry Investment Fund: Two phases totaling $47 billion
- Provincial and municipal subsidies: Additional $100+ billion
- Tax incentives: 10-year tax holidays for advanced chip manufacturers
Export Controls as Retaliation
China has demonstrated willingness to weaponize its supply chain strengths through export controls:
- 2025 Gallium/Germanium Controls: Restrictions on dual-use materials critical for semiconductors
- Rare Earth Export Quotas: Tightened controls on medium and heavy REEs effective April 2025
- Technology Licensing Requirements: December 2025 policy requiring foreign firms to obtain licenses for products containing Chinese-sourced minerals
🌐 Global Semiconductor Industrial Policy Comparison
Emerging Alliances and Blocs
U.S.-Led Coalition
The United States is forming a coalition with democratic partners to coordinate export controls and ensure advanced technology does not flow to China:
- Netherlands: Home of ASML, coordinating EUV export restrictions
- Japan: Key materials and equipment supplier, implementing parallel export controls
- South Korea: Home of Samsung and SK Hynix, balancing U.S. alliance with China market access
- Australia: $8.5 billion U.S.-Australia pact signed October 2025 for joint rare earth projects
China's Resource Partnerships
China is strengthening its own network of resource partnerships, particularly with countries in Africa and Latin America, to secure raw materials:
- Democratic Republic of Congo: Cobalt mining (70% of global supply)
- Chile: Lithium extraction partnerships
- Myanmar: Rare earth ore imports (129,500 metric tons in 2024)
The Bifurcation of Global Technology
The result of these competing strategies is a bifurcation of the global technology ecosystem, where economic efficiency is increasingly subordinated to strategic imperatives of security and sovereignty. This creates:
- Parallel Supply Chains: Western and Chinese ecosystems with limited overlap
- Technology Decoupling: Divergent standards and architectures
- Reduced Efficiency: Duplication of R&D and manufacturing capacity
- Higher Costs: Loss of economies of scale and specialization
This fragmentation represents a fundamental shift from the globalized, efficiency-optimized supply chains of the 2000s-2010s toward a more regionalized, security-focused model. The long-term implications for innovation, costs, and global economic growth remain uncertain, but the direction of travel is clear: nations are prioritizing strategic autonomy over economic optimization.