U.S.-China Tech Rivalry: The Geopolitics of Semiconductors

would be denied US-made manufacturing equipment, and Chinese equipment suppliers could no longer secure components sourced from the United States.

Besides the restrictions mentioned above, in October 2023, the Commerce Department reduced the types of semiconductors that American companies can sell to China, citing the desire to close loopholes in existing regulations announced in 2022.[14] Advanced artificial intelligence chips, such as Nvidia’s H800 and A800 products, will be affected, according to a regulatory filing from the US company. In September 2024, the Commerce Department banned the sale of connected and autonomous US vehicles equipped with Chinese and Russian software and hardware to protect national security and US drivers.[15]

In March 2025, additional chip restrictions were imposed by the Trump administration, blacklisting dozens of Chinese entities from trade in semiconductors and other advanced strategic technologies.[16] Similarly, in May 2025, the US Department of Commerce ordered major American and international companies, such as Cadence, Synopsys, and Siemens EDA, to stop providing Electronic Design Automation (EDA), which is vital for semiconductor chip design, to China.

To close the loopholes that let China get its hands on powerful AI chips, the Trump administration is looking to tighten the rules around shipping advanced chips, like Nvidia’s advanced AI processors, to Malaysia and Thailand. Although the US has already banned direct sales of Nvidia’s top AI chips to China, there’s concern that these chips are being routed through Southeast Asian countries to get around the ban. A draft of the Commerce Department rule aims to block this indirect supply chain, but the proposal has not been finalized yet and may change.[17]

According to officials from the US Commerce Department, the newly imposed rules were intended to hinder China’s progress in building advanced AI systems that could have military applications. At the same time, the measures aim to weaken China’s domestic semiconductor sector, which Washington views as a potential risk to the security of the United States and its allies.

China’s Response
China has made substantial strategic investments and launched programs to strengthen its role in the global semiconductor market. By 2005, China became the world’s largest consumer of semiconductors, and by 2012, China had purchased more than half of the world’s semiconductor consumption. China’s share of total world semiconductor imports grew from 1 per cent to 23 per cent between 1995 and 2019. China became a substantial manufacturer of semiconductors, with 20 per cent of world