Silicon Siege

Written By:

Lee Elliott, Knight Frank

11 Aug 2025

10 minutes to read

Categories: Publication Your Space Your Space

In the grand theatre of global power, semiconductors have quietly assumed centre stage.  What was once a niche pursuit of shrinking transistors into ever-smaller footprints, has become a high-stakes drama in which nations deploy export controls like artillery, corporate champions marshal state-backed funding as elite legions, and every licensing decision ripples through markets like an echoing drumbeat.  To borrow from the tenor of Chris Miller’s Chip War, we are witnessing the ‘new oil’ of the twenty-first century morph into a battlefield, where technological mastery and economic muscle fuse into geopolitical clout. 

In this narrative, two seemingly disparate acts – the saga of China’s quest to build its own extreme-ultraviolet (EUV) lithography machines and Nvidia’s sudden resumption of AI-chip exports to China – are interwoven threads of a larger tapestry, each illuminating how ambition, fear, and strategy dance at the heart of the semiconductor saga.

Act I: The EUV Embargo – A Siege at the Gates

Imagine a medieval castle whose gates guard the most precious treasure in the land.  For the global semiconductor ecosystem, ASML’s EUV machine is that fortress’s drawbridge and portcullis combined – without it, no army can penetrate the walls of next-generation, sub-7nm logic.  Since 2019, the United States has effectively installed its own sentries at the gate, leveraging its influence under the Wassenaar Arrangement and bilateral pressure to bar China from ASML’s most advanced tools.

In Chip War, Miller describes how export controls operate like invisible moats: “Without the key technologies, rivals may knock at the gates but cannot storm the keep.”  Under successive U.S. administrations, officials have argued that EUV lithography is dual-use, equally vital for the silicon chips that power smartphones and the microcontrollers in advanced missiles.  Thus, Washington has deemed the risk of unrestricted sales too great.  In practical terms, this means that Chinese giants such as SMIC and Hua Hong are condemned to rely on multi-patterning with older deep-ultraviolet (DUV) scanners – an elaborate dance of layering and etching that can eke out 7nm-class chips, but at significant cost and with limited yield.

To China, the embargo is existential, not merely commercial.  Chips underpin everything from the cloud-based AI engines to the control systems of electric vehicles – and, in the calculus of Beijing’s leadership, they are also the sinews of national defence.  Thus, a new campaign began in the cavernous halls of Beijing power: build an indigenous EUV machine or forever cede the high ground.

Act II: Beijing’s Big-Fund Blitz – The Forging of a Homegrown Champion

In response to the Western-led restrictions, Beijing mobilised its ‘Big-Fund’ – a state-backed pool of roughly US$37bn – to grease the wheels of domestic semiconductor innovation.  At its vanguard stand firms like SiCarrier and Shanghai Micro Electric Equipment (SMEE), which today bear the weight of the nation’s technological aspirations on their shoulders.

Picture a workshop where master craftsmen toil to reconstruct a lost legendary sword from fragments of steel and mithril.  So too do China’s engineers wrestle with EUV’s core challenges: producing plasma light sources that fire tin droplets at 13.5bn, sculpting defect-free reflective mirrors with nanometer precision, and designing photoresists whose chemistry can withstand the fierce UV bombardment. 

SiCarrier has trumpeted its advances in multi-patterning deposition systems, claiming yields comparable to 5nm processes – yet even these ‘miracle weavers’ hesitate to call their work true EUV.  SMEE, meanwhile, sealed its commitment by filing EUV scanner patents in 2024 and announcing trial units by late 2025.  But between prototype production lies an abyss:  ASML’s EXE:5000 ‘Beast’ can etch billions of transistors per wafer with throughput and uptime that domestic rivals are still years away from matching.

Here, Miller’s metaphor of ‘weaponised interdependence’ rings true.  The U.S. and its allies have used the EUV embargo to hobble Chinese progress; in turn, China has weaponised state capital to undercut that chokehold.  Each side intensifies the arms race: Western OEM’s pour R&D into even more sophisticated high-NA EUV systems, while Beijing channels subsidies, tax breaks, and expedited approvals to keep its ‘homegrown armoury’ on pace.

Act III: Geoeconomic Chess – India, Taiwan, and the Great Diversification

As the EUV embargo drives Beijing to pour state funds into a home-grown lithography industry, New Delhi is mounting its own strategic counter-play – one that seeks to rewrite the semiconductor map rather than merely navigate around chokepoints.  Having learned the cost of over-concentration during the pandemic, and mindful of rising tensions in the Taiwan Strait, India has quietly set a course to become a third pillar of the global chip ecosystem.

Seeding a Local Ecosystem

In 2024, under its ‘Made in India’ umbrella, New Delhi announced incentives – tax holidays, subsidised land, and power-rate rebates – targeted explicitly at semiconductor fabs and associated service providers.  The goal: foster locally owned fabs, advanced packaging facilities, and test-and-assembly lines.  India’s first 65nm fab (backed by Tata Electronics) will come online in 2026, marking a symbolic milestone in its drive for self-sufficiency and job creation in high-tech manufacturing.

Courting Taiwanese Expertise

Recognising that world-class chip plants require more than policy carrots, India has extended a diplomatic olive branch to Taiwan’s semiconductor titans.  Over 250 Taiwanese firms – spanning process equipment suppliers, packaging specialists, and EDA vendors – are in advanced talks to establish R&D centres and pilot assembly lines within the Gujarat International Finance Tec-City (GIFT City).  For TSMC and UMC, India offers a fast-growing domestic market and a political hedge against Beijing’s long-term ambitions; for India, the alliance accelerates technology transfer and skills development in one swoop.

Building Resilience Through Diversity

But diversification is not just about geography; its about layering trusted partnerships.  New Delhi has also inked MOUs with Japan and the U.S. on semi-conductor research, ensuring access to advanced packaging techniques (3D stacking, wafer-level fan-out) and critical materials (photoresists, speciality gases).  Combined with Taiwanese involvement in wafer-fab construction and equipment maintenance, India is stitching a multi-national ‘semi-conductor consortium’ to reduce single-point failures in the supply chain.

A New Axis Emerges

Viewed through Miller’s lens of ‘weaponised interdependence’, India’s strategy represents more than economic diversification – it is a geopolitical gambit to diminish the leverage that any single supplier (or nation) can wield.  By fostering a triangular alliance among India, Taiwan, and fellow democracies, New Delhi is carving out a stake in the high-stakes chip diplomacy chessboard – one that complements Western export controls and counters Beijing’s ‘Big Fund’ machinations.

In effect, Act III is the prologue to a new semiconductor order: not a bipolar duel between the U.S. and China, but a tripartite framework in which India stands as both partner and counterweight – an emerging hub where policy, investment, and technological prowess converge to reshape the contours of global chip power.

Act IV: Nvidia’s Diplomatic Détente & Record Market High – H20’s 2nd Act

While hardware titans dual over lithography, fabless designers wield different weapons: market access and intellectual property.  In mid-July 2025, Nvidia quietly filed U.S. license applications to Chinese customers to resume shipments of its flagship H20 AI processors.  To understand the importance of this move, imagine a great river whose flow has been dammed; the sudden opening of the gates sense a surge downstream, flooding markets and revitalising industries.

The H20 – optimised for large-language models, inference tasks, and high-performance computing – its not a mere component but a revenue juggernaut, generating upwards of US$8bn per quarter.  China, long the single largest consumer of Nvidia’s GPUs, had watched its appetite stifled by export controls.  Then, in a rare diplomatic bargain tied to rare-earth negotiations, Beijing agreed to prioritise shipments of certain magnet materials to U.S. suppliers in exchange for eased chip curbs.

The market reaction was instantaneous and profound:  Nvidia’s shares jumped 4% on July 15th lifting the Nasdaq Composite to another record close, and propelling Nvidia’s market capitalisation past the historic US$4tn mark, making it the most valuable public company ever.  To put that in perspective, Disney’s market cap at the same time was roughly US$215bn, while Amazon’s sat at about US$2.37tn – meaning Nvidia now dwarfs the storied entertainment giant by nearly 18.6 times and eclipses Amazon by around 1.7 times.  This unprecedented peak underscores how shifts in export policy and bilateral negotiations can translate directly into corporate valuations – and, by extension, national economic clout.

In narrative terms, this is a quiet peace treaty in a broader war, a ceasefire that underscores how commerce can unlock (or lock) strategic advantage.  For Nvidia, the thaw restores a vital revenue corridor and shores up R&D budgets for next-generation products.  For China, it provides a sanctioned shortcut to the cutting edge of AI compute, enabling domestic research labs and hyperscalers to push forward on their own regenerative-AI ambitions. 

Sector Giants: The Top 15 Semiconductor Companies by Market Capitalisation 

(as of 21st July 2025)

Act V: The Philosopher’s Stone – Where Policy Meets Particle

What unifies these storylines is not the technical minutiae but the recognition that semiconductors are both material and metaphor – units of economic value and symbols of national potency.  As Miller emphasises, ‘whoever controls the chip supply chain, controls the engine of modernity’.  In practice, this translates to a perpetual cycle of sanction and subsidy, embargo and investment, in which every policy shift precipitates technological recalculation.

Looking ahead, the next frontier will extend beyond lithography.  High-NA EUV promises even finer features sizes; directed self-assembly and chiplets offer alternative pathways to performance gains; advanced packaging decouples scaling from planar transistor pitch.  Each breakthrough will spawn new chokepoints and new campaigns to secure or sever them.  Meanwhile, expect tighter collaborations among like-minded states: the U.S., Europe, Japan, Korea, and perhaps India forming a semiconductor coalition to defend common interests, even as China forges its own axis with ‘non-aligned’ partners in the Middle East and Africa.

Epilogue: The Long Shadow of ‘Chip War’

In the crucible of competition, semiconductors have assumed a role far beyond gadgets and data centres.  They are the silent arbiters of tomorrow’s economies, the fulcrums of military modernisation, and the lodestars of scientific ambition.  Each export restriction, each state investment, and each licensing decision adds another move on the global chessboard that Miller vividly describes.

To read Chip War is to appreciate that every transistor etched into silicon carries the weight of strategy, that every foundry built is a fortress, and that every chip shipped across borders is an envoy in the diplomatic tug-of-war between great powers.  In this heightened drama, China’s lonely workshops and Nvidia’s hastily filed license applications are individual verses in a sprawling epic – a story still unfolding, with stakes as high as any in human history.

And so, as the world watches each new announcement, each patent filing by SMEE, each logistical agreement between Taiwan and India, and each restricted-list update from the Commerce Department, remember that these are not mere footnotes in a tech journal.  They are chapters of a fierce saga, in which silicon and strategy, innovation and influence, entwine to shape the destiny of nations.

This article was originally published on 21st July as part of our (Y)OUR SPACE Talking Points series. For more articles like these, download our (Y)OUR SPACE Anthologies.