A. Irawan J Hartono, Specialist in International Political Economy, PACIS UNPAR
In addition to fierce competition in the trade of various commodities to the US market, China is also embroiled in fierce competition with the United States in the production of microchips, highly sophisticated semiconductors that can be used to manufacture high-tech products. President Joe Biden has restricted China’s access to the development of such cutting-edge technology, including by banning Chinese products from entering the US market. Under President Trump, the US imposed export restrictions on chips to China that could enhance the country’s ability to develop weapons systems and artificial intelligence. The US-China tensions in the microchip technology sector, which have persisted since Biden’s presidency, are projected to escalate further in the future. International political economy expert PACIS Unpar shared his analysis during a discussion at the PACIS Corner on May 22, 2025. This article is the second piece of writing taken from the discussion at the PACIS Corner.
How did the chip war emerge?
How significant is the impact of the chip war on the world, global technological progress, and geopolitical tensions among major countries?
I will begin by explaining the importance of semiconductors and why it makes perfect sense for the US and China to try to win the race. As I understand it, semiconductors are currently the most advanced technology, underpinning development in a wide range of areas. Chips are used in the production of everyday goods, communication technology (including intelligence), space technology, and, of course, advanced weaponry. In the military sector, chips play a role in intelligence communication technology, drones, fighter jets, smart bombs, and so on. As a result, the winner of the chip war—whether it be the United States or China—will gain significant leverage in supporting their position as the world’s leading nation (through production, economic, and military supremacy). The ability to develop chips as a support for a nation’s economic and military strength, which is crucial in the competition among major nations to become global leaders, forms the basis of the intense rivalry between the US and China in the form of the chip war.
The Chip War in the Context of the Global Supply Chain
The winners in the chip war will be determined by the extent to which they can control various nodes in the global semiconductor supply chain. Chip production can be divided into at least three stages: designing, mass production, and intermediate processes. Technology companies such as Nvidia, AMD, Qualcomm in the US, and Huawei in China are involved in semiconductor designing. Companies engaged in mass production include TSMC (Taiwan Semiconductor Manufacturing Company) based in Taiwan and Samsung in South Korea. Assembly, Testing, and Packaging (ATP) is carried out in Penang, Malaysia (Intel). In between these stages is ASML (Advanced Semiconductor Materials Lithography) based in the Netherlands, with its lithography technology. Additionally, Zeiss in Germany provides supporting instruments for lithography. Before the chip war, which is seen as having begun during Joe Biden’s presidency (it can also be seen as having begun with the arrest of Meng, a Huawei executive, in Canada in 2018), these companies were relatively interconnected in the production of semiconductors. After the chip war began, the US aimed to isolate China from this network.
It is understandable that the US is also trying to control companies outside its borders in this chip war: TSMC in Taiwan and ASML in the Netherlands. Since around 2024, TSMC has been established in Arizona, US. Taiwan’s allegiance here can be understood as a reward for the security umbrella provided by the US to Taiwan in facing China. What about ASML? The US has secured a commitment from ASML not to sell its most advanced lithography technology to China, namely EUV technology, which in this case benefits the US. However, as a company, ASML has not rejected China’s offer to sell its technology that is less advanced than EUV (Extreme Ultraviolet lithography), namely DUV (Deep Ultraviolet lithography) technology.
Given China’s ability to develop ordinary technology into something advanced, as seen in the emergence of the exceptionally capable DeesSeek, there is speculation that China has developed lithography technology by advancing it from DUV. Furthermore, China already has a lithography company in Shenzhen, Naura. Given that mass production is not a major issue for China, it can be assumed that the US has little advantage in the chip war with China.
What steps are the US and China taking to win the chip war?
Chris Miller explains that winning the chip war requires two conditions.
First is the success of creating superior semiconductors. A strategy of “cannibalism,” whereby products are constantly replaced with more advanced ones, can be applied here. Second is building coalitions with companies involved in semiconductor manufacturing outside the country (such as the US).
Currently, the United States is actively striving to win the chip war through a program called Stargate, which began in January 2025. The goal is to create jobs, economic strength, and national security. It also aims to position the US as a global leader in AI infrastructure. This program was initiated by President Donald Trump himself, in collaboration with government institutions such as the Department of Commerce, primarily to facilitate large-scale chip sales to the UAE.
Several US technology companies involved in design were recruited for this program: Nvidia (to produce advanced chips and servers), Oracle (to provide cloud infrastructure), Microsoft (to build data centers), OpenAI (to provide infrastructure for advanced AI technology, partnering with G42 to build data centers), and others. As a partner outside the US, G42, a technology company from the UAE, was recruited to build data centers. In terms of funding, the program includes SoftBank from Japan (Masayoshi Son) and MGX from the UAE.
What about China?
China has built its own network. US pressure seems to have actually spurred rapid progress in China’s semiconductor industry. China has rallied efforts to rival the US in semiconductor production. Companies mobilized to win this chip war include SMIC, Huawei, Xiaomi, DeepSeek, and Alibaba. One of the advantages of Chinese technology companies is their ability to innovate using materials that are not particularly new or advanced, yet produce something extraordinary, as demonstrated by DeepSeek. Another advantage related to China’s advanced technological capabilities, which are not directly related to semiconductor production, includes its ability to land a spacecraft on the moon (the Chang’e program) and the superiority of its fighter jets (J10), which cost only about one-fifth of the fighter jets they have successfully defeated (Rafale), in the recent Pakistan-India war (2025). The latest chip successfully produced by Nvidia is the Nvidia Blackwell Ultra, while Huawei’s is the Ascent 910C, both of which are estimated to have roughly equivalent capabilities. Huawei has also developed its own OS, HarmonyOS, but it is still limited in scope (in China).
It can be seen that the US appears to have fulfilled both requirements for winning the chip war (Chris Miller), while China lags behind in terms of forming coalitions with other countries that are part of the global semiconductor supply chain. However, China can undergo a very rapid learning process in the manufacture of advanced chips. Additionally, China excels in maintaining the structure it has built, where “leaks” (deviant actions) from parties within that structure are minimal. The latter does not seem to be the case with the structure built by the US, where there is a potential for companies to develop “Plan B” if the implementation is detrimental to them.
“… China can undergo a very rapid learning process in the production of advanced chips … excels in maintaining the structure it has built.”
What will be the outcome of the chip war?
There are two scenarios in this regard.
The first scenario states that there will be two completely separate digital technology systems: one developed by the US and one developed by China. The second scenario is limited cooperation (selected collaboration) between the two in the field of chip production. So there will be cooperation in non-sensitive areas, while in sensitive areas both sides will keep their technology to themselves. According to the author, the second scenario is more likely to occur. If this is indeed the case, then products supported by the most advanced semiconductors will be produced based on selected collaboration between two sources: the US and China. Here, it can be seen that non-sensitive components can come from both sides, or even from a third party.
What will be Indonesia’s position in the system that will be formed after the chip war?
It is highly likely that Indonesian consumers will benefit because both sides will offer high-tech products at not-too-high prices as a result of their competition. What can Indonesia do in its position as a producer? Suppliers of technology products, especially semiconductors, can be divided into four layers. The first/highest and second tiers include Nvidia, Oracle, Intel, and others. Indonesia is in the fourth tier.
In the author’s view, Indonesia will have the opportunity to fill the semiconductor supply chain for products that are not too sensitive, not in the production of semiconductors themselves, but in supporting products that use semiconductors (in ATP, for example). Although reluctantly, it must be acknowledged that the desire to become a major semiconductor supplier—meaning competing with first- and second-tier technology companies—is not realistic at this time. Nevertheless, even in a limited role, Indonesia needs to consider not only acting as a market but also as part of the global semiconductor supply chain, or at least at the regional level, even if not in its key elements.
“Indonesia will have the opportunity to fill the semiconductor supply chain for products that are not too sensitive, not in the production of semiconductors themselves,…”.
How far will the potential military competition between China and the US go?
From Organski’s perspective, it is clear that competition for the top spot as global leader has been taking place in the economic and technological spheres. Competition in the military sphere, which has occurred but not on a full/direct scale, relates to the issue of Taiwan’s sovereignty, which is supported by the US, and China’s claim in the form of the Nine (now Ten)-Dash Line, which is opposed by the US. However, this has not yet reached a boiling point, so it is not yet clear who has the upper hand. What can be observed so far is that in the economic and technological fields, there is only a small margin of advantage on the US side, which China could overtake at any time.
What is quite worrying is the US plan to build Golden-Dome, a defensive and offensive defense system in space. This system will protect the US from attacks originating from the earth’s surface or from facilities located in space. This system will certainly also have an offensive side. China has expressed its concerns in this regard. The construction of military facilities in space requires digital technological supremacy, with the backbone being the possession of superior semiconductors. In this context, the rivalry between the two in the chip war could expand into military rivalry, with the use of super-advanced weapons and facilities. The US-China rivalry in the chip war is not only relevant in terms of global economic dominance, but also in terms of military supremacy. If left unchecked, the semiconductor rivalry could drag both countries into a dangerous military rivalry. Hopefully, this will not happen.
… What is quite concerning is the US plan to build the Golden-Dome, a defensive and offensive defense system in outer space.”
Sumber:
Wall-street Journals.
Financial Times
Time
The Washington Post.
Chris Miller, Chipwar: The Fights for the World’s Most Critical Technology, Scribner, 2022.
Source Information:
Adelbertus Irawan J Hartono completed his bachelor’s degree in International Relations at Unpar, his master’s degree at the University of Leeds, England, and his doctoral degree at the University of Groningen, the Netherlands.
