Chips: the invisible technology driving global geopolitics

Translated by Mariateresa Tauro

Chips are the technology everyone is talking about, for good reason. Every year, more than a trillion are sold worldwide, an impressive number that, according to various estimates, is set to double by 2030. However, semiconductors are not just electronic components; they are at the centre of geopolitical tensions, which is why increasingly complex value chains are being built. This is the pretext for battles over tariffs and the driving force behind states' pursuit of technological independence. Chips are, in fact, the foundation of modern technology. They enable smartphones, computers, televisions and household appliances to function and they are an invisible part of our daily lives, even though we often do not realise it. However, their importance goes far beyond civil consumption. Semiconductors are also essential in strategic sectors such as automotive, energy, defence, communications and, above all, artificial intelligence. In many ways, whoever controls chips controls a crucial resource for economic and military dominance in the 21st century.

To truly understand the scope of this technology, it is useful to start with the basics. A chip, often called a semiconductor, is a set of electronic circuits embedded on a small plate of semiconductor material that can contain billions of transistors, which are essentially “switches” whose task is to control the flow of electrical signals. There are different types of chips, each with specific functions. Logic chips perform calculations and execute instructions, representing the “brain” of devices. This category also includes graphics processors, or GPUs, which are now essential for training and operating artificial intelligence systems due to their ability to perform enormous volumes of calculations in parallel. Memory chips are used to store information, as is the case with RAM or flash memory. Instead, analogue chips convert signals from the real, analogue world into digital signals and vice versa, playing a crucial role in sensors, converters and interfaces. The key element in a chip is the size of the transistors. The smaller they are, the more can be fitted onto a single chip and the greater the computing power the chip can offer. It is no coincidence that technological leadership is often measured in nanometres: today, TSMC, the leading Taiwanese company in the sector, is capable of producing chips with production nodes reaching up to 2 nanometres. The semiconductor manufacturing process consists of several highly specialised stages. It starts with the design, entrusted to the so-called fabless companies, which design the chip architecture without being directly involved in physical production. This is followed by the actual manufacturing process, carried out by foundries, which use extremely sophisticated materials and technologies to produce the wafers on which the transistors are engraved. Finally, the assembly, testing and packaging phase takes place, often referred to simply by the acronym ATP, which makes the chip ready to be integrated into the final products.

It is precisely by observing this production chain that the geopolitical dimension of semiconductors emerges. The global supply chain is extremely complex: over a thousand steps, involving around seventy countries and an estimated sixteen thousand suppliers. Despite this apparent dispersion, some critical nodes are concentrated in the hands of very few companies and a handful of countries. The United States occupy a central position, especially in the design and development of fundamental tools such as EDA, or Electronic Design Automation, the software essential for designing complex circuits: without EDA, modern chips would not exist. Washington also maintains a prominent role in certain segments of advanced manufacturing, architecture and specialised semiconductors, as demonstrated by companies such as Nvidia, Intel and Qualcomm. Taiwan is at the heart of cutting-edge manufacturing. TSMC holds approximately 92 per cent of the market for chips manufactured using processes smaller than 10 nanometres and is the dominant manufacturer for the most advanced technology nodes. Although the Netherlands is a relatively small country, it occupies a strategic position thanks to ASML, the only company in the world capable of producing extreme ultraviolet lithography machines, known as EUVs, which are essential for manufacturing the most sophisticated chips. Without these machines, advanced production is simply not possible. Japan plays a crucial role in supplying materials and certain specialised equipment, while South Korea is a key player in manufacturing, particularly in the memory segment and in certain advanced production areas. China, for its part, is involved in most stages of the supply chain: from design and manufacturing to assembly, testing and packaging. However, it remains heavily dependent on foreign countries for certain critical elements, such as EDA, the most advanced manufacturing equipment (known as SME, Semiconductor Manufacturing Equipment) and certain special materials.

This dependence on Western technologies exposes Beijing to significant vulnerabilities. At the same time, the concentration of advanced manufacturing in Taiwan is perceived as one of the main geopolitical vulnerabilities of the global economy. In light of this scenario, since 2019, the United States and China have been involved in what is often referred to as a veritable “chip war”. Washington is attempting to limit China's progress in more sophisticated semiconductors through export controls and technological restrictions. Beijing is responding with massive investments to develop autonomous capabilities and reduce its dependence on the West. The European Union is also involved in this context, aiming at reducing its strategic vulnerability: with the Chip Act, adopted in July 2023, Brussels aims to strengthen European technological autonomy and double the EU's market share in the semiconductor sector by 2030.

Chips, therefore, are not just a billion-dollar market or an invisible component of the devices we use every day. They are a fundamental technology and a resource capable of influencing global industrial policies, alliances and rivalries. The complexity of their value chain, the concentration of critical technologies in a few companies and a few areas of the world, and the race for technological autonomy make semiconductors one of the most decisive issues of the next decade.

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