The Chip War Escalates: How U.S. Export Controls Are Reshaping Global Tech

When the United States imposed export controls on advanced semiconductors and chip-making equipment in 2022, the objective was straightforward: slow China's AI development by restricting access to the training compute that drives frontier model capability. Five years later, the picture is far more complicated.

Chatham House — in a February 2026 analysis — concluded that export controls alone will not prevent China from further developing advanced AI. The institution's assessment is grounded in a structural reality: semiconductor development requires knowledge, capital, equipment, and time. Controls can constrain equipment access, but knowledge diffuses through research publications, talent flows, and reverse engineering.

The China Response

China's semiconductor industry has responded to controls with a two-track strategy. Track one is domestic capability building — aggressive investment in chip fabrication, chip design tools, and semiconductor manufacturing equipment. Track two is workaround acquisition — securing controlled chips through third-country intermediaries, maintaining access to equipment not explicitly covered by U.S. export rules, and developing alternative supply chains that route around U.S. jurisdiction.

The paradox of the controls is that they have accelerated China's urgency. What was once a commercially driven modernization effort has become a national security imperative with bipartisan political support and seemingly unlimited capital. China's semiconductor subsidies now mirror the strategic industrial policy playbook that enabled it to dominate solar panels and electric vehicle batteries.

The Allied Economies Problem

The U.S. strategy has not been cost-free for allied economies. South Korea, Taiwan, Japan, and the Netherlands — all of whose technology sectors depend heavily on semiconductor exports to China — have faced pressure to align with U.S. controls that do not necessarily serve their own economic interests. ASML, the Dutch lithography monopoly, has been barred from shipping its most advanced machines to China, costing it revenue and creating diplomatic friction with Beijing.

The EU's evolving "Buy European" industrial policy is partly a response to this tension. European governments are calculating whether technological decoupling from China is worth the economic cost — and whether it is achievable given the integrated nature of global semiconductor supply chains.

India's Calculated Move

India's decision to impose its own export controls on certain dual-use technologies — announced in the context of the Raisina Science Diplomacy Initiative at the Raisina Dialogue 2026 — signals a new kind of player in the tech governance space. India is not aligning automatically with the U.S. position; it is making calibrated decisions based on its own assessments of risk and leverage.

The Raisina Science Diplomacy Initiative, launched at the January 2026 Raisina Dialogue in New Delhi, created a platform for addressing international governance of emerging technologies — AI, semiconductors, and research security. India's pitch is itself as a credible counterparty for both Washington and Beijing: a democracy with advanced technical capabilities and no structural interest in either side's dominance.

Whether India's positioning translates into genuine diplomatic leverage depends on whether its technical capabilities match its diplomatic ambition. Right now, India's semiconductor ecosystem is nascent — it imports far more chips than it produces. The leverage is aspirational, not yet operational.

The chip war is entering a new phase. Controls remain in place, but their effectiveness is contested, their collateral costs are accumulating, and the strategic vacuum they have created is being filled by Chinese domestic capability building at a pace that surprised observers five years ago. The question is not whether the U.S. can contain China's semiconductor development through controls — the evidence increasingly suggests it cannot. The question is what comes next.