The Real Stakes Behind Silicon Sovereignty

In the 20th century, nations went to great lengths to secure energy independence. Control over oil reserves determined not only economic prosperity but also geopolitical dominance. Fast forward to the 21st century, and the new currency of power is no longer oil—it is silicon. Semiconductors, the microchips that power everything from smartphones to fighter jets, are the bedrock of modern life. The stakes of who controls their design, manufacturing, and supply chain are immense.

In this context, the concept of “silicon sovereignty” has emerged as a defining issue for governments, businesses, and global alliances. At the heart of this struggle lie semiconductor foundries—the fabrication plants that bring chip designs to life. Much like oil rigs once determined the fortunes of energy-dependent nations, foundries are the modern-day infrastructure upon which economic and technological security rests.

Why Silicon Is the New Oil

Oil powered the industrial age, but silicon powers the digital age. Chips are embedded in almost every sector:

• Consumer electronics: Smartphones, laptops, and wearables.

• Critical infrastructure: Power grids, telecommunications, and transportation systems.

• Defense and security: Satellites, missile systems, surveillance, and cyber tools.

• Emerging technologies: Artificial intelligence, quantum computing, autonomous vehicles, and biotech.

Without chips, modern economies grind to a halt. The COVID-19 pandemic exposed this vulnerability when global shortages forced automakers to shut down production lines, delayed consumer electronics launches, and revealed the fragility of just-in-time supply chains. For governments, it was a wake-up call: dependence on a few key foundries is a national security risk as profound as dependence on foreign oil once was.

The Geopolitics of Foundries

At the center of the semiconductor universe stands Taiwan Semiconductor Manufacturing Company (TSMC), which produces over 60% of the world’s semiconductors and more than 90% of the most advanced chips. Alongside TSMC, Samsung Electronics in South Korea and Intel in the United States form the core of leading-edge foundry capacity. But the dominance of TSMC in particular has placed a small island at the center of global geopolitical tensions.

China, the United States, and Europe are all racing to secure chip manufacturing independence:

• China views semiconductor independence as essential for breaking free of U.S. technology controls. Despite investing hundreds of billions of dollars into its domestic chip industry, it still lags significantly in producing advanced nodes (sub-7nm).

• The United States has recognized its over-reliance on Asia for chipmaking. The CHIPS and Science Act of 2022 is funneling $52 billion into domestic semiconductor manufacturing and R&D to re-shore critical production.

• The European Union has launched the EU Chips Act, with a €43 billion investment plan to double its global semiconductor production share by 2030.

In this struggle, semiconductor foundries are the new geopolitical choke points, much like the Strait of Hormuz was for oil. Control over them translates into leverage over innovation, trade, and military capability.

Foundries as the Oil Rigs of the Digital Economy

The analogy of foundries as oil rigs is not just metaphorical—it reflects structural similarities:

1. Concentration of Supply
   Oil reserves were concentrated in the Middle East; semiconductor foundries are concentrated in East Asia. The limited number of advanced fabs makes global supply chains highly vulnerable.

2. Strategic Leverage
   Just as oil producers once wielded power through embargoes and pricing controls, countries that dominate chip manufacturing can exert pressure in trade disputes or geopolitical standoffs.

3. High Capital Intensity
   Oil rigs required immense capital, engineering expertise, and infrastructure. Semiconductor fabs are similar—building a cutting-edge fab costs upwards of $20 billion, with only a handful of players possessing the expertise to operate them.

4. Technological Arms Race
   The oil race was about extraction efficiency; the chip race is about achieving ever-smaller nanometer process nodes. Both determine which players enjoy economic and technological supremacy.

Silicon Sovereignty: A National Imperative

For governments, “silicon sovereignty” is no longer just an industrial policy objective—it is a national security imperative. Consider the stakes:

• Military Dependence: Advanced weaponry requires cutting-edge chips. A shortage or adversarial supply disruption could weaken defense readiness.

• Economic Stability: The global semiconductor market is projected to surpass $1 trillion by 2030, making it one of the most lucrative and strategically vital sectors.

• Innovation Leadership: AI, machine learning, and quantum computing progress hinge on access to the most advanced semiconductors. Losing ground here means falling behind in global competitiveness.

The realization that “whoever controls the chips controls the future” has prompted a wave of industrial nationalism unseen since the oil crises of the 1970s.

The Role of Allies and Strategic Partnerships

Unlike oil, where reserves were largely natural endowments, chip manufacturing capacity can be relocated—but only with vast investments and international collaboration. That’s why partnerships are becoming the cornerstone of silicon sovereignty:

• U.S.–Taiwan–Japan–South Korea alignment seeks to counterbalance China’s rise by creating a resilient, allied semiconductor ecosystem.

• European alliances with companies like Intel and TSMC aim to boost local production while diversifying global supply chains.

• Quad nations (U.S., India, Japan, Australia) are exploring semiconductor supply chain cooperation to mitigate concentration risks in East Asia.

These partnerships mirror Cold War energy alliances, where oil supply security was underwritten by shared strategic interests.

Challenges in Achieving Silicon Sovereignty

Despite the urgency, building silicon sovereignty is not straightforward. Key challenges include:

• Astronomical Costs: Advanced fabs cost $15–$25 billion to build and require years to become operational.

• Talent Shortages: Semiconductor engineering and manufacturing expertise is concentrated in a few regions, creating bottlenecks in scaling global capacity.

• Supply Chain Complexity: Even if a country builds fabs, it still relies on specialized suppliers. For example, ASML in the Netherlands is the only company capable of producing extreme ultraviolet (EUV) lithography machines necessary for advanced chips.

• Geopolitical Flashpoints: Taiwan remains the biggest risk. Any conflict in the Taiwan Strait could trigger the most severe supply shock in modern history, with consequences more devastating than any oil crisis.

Looking Ahead: Foundries as Strategic Assets

As we enter an era where digital infrastructure defines global power, semiconductor foundries are being reclassified from commercial assets to strategic assets. Governments are offering subsidies, tax breaks, and direct investments to attract fabs, just as they once invested in oil exploration and refining capacity.

The next decade will see the rise of multiple regional semiconductor hubs, with the U.S., EU, and Asia each vying for dominance. But unlike oil, which could be stockpiled, semiconductors have short innovation cycles. Control of cutting-edge nodes—3nm, 2nm, and beyond—will determine technological leadership.

For more information on the report, visit:  https://www.kingsresearch.com/blog/silicon-sovereignty-semiconductor-foundries-geopolitics

Conclusion: The New Energy War Is Fought in Nanometers

The oil wars of the 20th century shaped geopolitics for generations. Today, the contest over silicon sovereignty is setting the stage for the 21st. Foundries are the new oil rigs—gigantic, capital-intensive, and geopolitically sensitive structures that hold the keys to modern economies.

Nations that secure control over chip manufacturing will not only safeguard their security but also define the trajectory of technological progress. In this new era, power is measured not in barrels of oil, but in nanometers of silicon. The real question is: who will own the rigs of the digital age?