Studying geopolitics through the global chip wars

In recent years, shifts in the global supply chain for semiconductors, also known as chips, have made headlines as countries grapple with an increasingly complex and unstable economic order. 

From the US’s export ban on advanced chips and chip-making equipment, to China’s threat to cut off exports of critical minerals for chip production, to Japan’s multi-billion-dollar investment to shore up local chipmaking capacity – countries are making strategic decisions to secure their place in a rapidly changing global economy. At the Blavatnik School, we bring the headlines into the classroom to allow students to examine them in greater depth, and prepare them with the academic and leadership tools needed to navigate them.

Economic security in a changing world

Economic security has taken centre stage in geopolitics. The term generally refers to a nation’s ability to protect and grow its economic stability in the face of external threats. The Covid-19 pandemic, as well as the coordinated sanctions against Russia following its invasion of Ukraine, showed just how interdependent major global supply chains have become – and exposed the strategic risks this interdependence may pose.

According to Professor Yeling Tan, two major long-term changes have made countries around the world seriously reconsider their national economic policies: “The first is the deterioration of the US-China relationship. The shift to a major power rivalry between the two meant that a lot of countries caught between them found themselves in uncharted territory in terms of how to manage foreign policy. The second is the emergence of complex supply chain networks that give disproportionate power to individual firms and individual countries. This goes against standard economic theory about trade creating interdependence that fosters peace.”

Nowhere has this become more apparent than in the global semiconductor supply chain. Semiconductors power everything from coffeemakers to smartphones to sophisticated weaponry – making them a “dual-use” technology with both commercial and military applications. Semiconductor production takes more than 500 stages, and a chip can cross borders more than 70 times from design to assembly to reaching the final user.

Any country would struggle to produce every kind of chip from start to finish within its own borders, given the massive costs, critical materials, and diverse skills required. Instead, countries and companies have come to specialise in different segments, leading to a highly complex and globalised supply chain.

While for years these international interdependencies translated to economic prosperity – global semiconductor sales reached nearly US$630 billion in 2024 – in recent times, they have been seen as a point of vulnerability for some, and a tool of coercion for others. Our new Blavatnik School case study, “Chips and chokepoints: export controls for Japan’s semiconductor industry”, explores how countries are managing both the risks and opportunities of this economic interdependence.

Navigating the chip wars

In the 2020s, Japan was striving to reclaim the global semiconductor dominance that it had last enjoyed in the 1980s. But just as Japan was reinvesting in its semiconductor industry, the country found itself pulled into the intensifying competition between Washington and Beijing. Like countries around the world, Japan had to figure out how to promote its own interests while navigating important relationships with both the US, its major security ally and economic partner, and China, its geographic neighbour and largest trading partner. 

The first challenge came in 2022, when the US alleged that China was using advanced US chips to modernise its military. Washington implemented wide-sweeping export controls to prevent China from accessing advanced chips and the equipment needed to make them.

The restrictions on semiconductor manufacturing equipment (SME) were particularly important to Japan. The global SME segment, particularly for the most advanced equipment, was dominated by five companies: three in the US, one in the Netherlands and one in Japan. The US wanted Japan and the Netherlands to align with its export controls to cut off China’s access to this sophisticated equipment. After nearly a year of talks, in 2023 Japan (and the Netherlands) introduced limited export controls on certain SME tools, though without naming China as the target. China responded to the countries’ controls by circumventing restrictions and redoubling efforts to build domestic capacity.

But as semiconductor technology rapidly progressed, the US wanted even further restrictions. The case study is set in late 2024, as Japan is facing renewed requests from the US to tighten its export controls, including for photoresist, a critical chemical in the chip manufacturing process that is dominated by Japanese firms.

Japan has to weigh up the risks and benefits of either tightening its export controls or resisting US pressure to do so. On the one hand, Japan relies on China for several critical minerals, not only for the semiconductor industry, but also for its major automotive industry. Sales in China are also an important source of revenue that Japanese firms use to fund research and development, an expensive but vital function needed to stay ahead of global competition. On the other hand, Japan relies on the US for its security umbrella, as well as key inputs into its semiconductor industry, meaning Japan could risk being cut off from key US software and tools.

In class, students step into the role of an advisor to Japan’s trade minister. To help with their decision, students are equipped with key political science concepts that can help make sense of the dilemma at hand. For instance, they explore the theory of weaponised interdependence, which describes how countries can, in certain circumstances, use their dominant market positions in interdependent supply chains towards coercive ends.

As students come to find out, there are no easy answers. But the case discussion provides them with a chance to apply academic theories to a complex, real-world dilemma, and practise exercising their own judgement in a high-stakes context. By developing these skills in the classroom, students will be better equipped to tackle the major global policy issues of today.

This Blavatnik School case study, "Chips and Chokepoints: Export Controls for Japan's Semiconductor Industry", was co-authored by Professor Yeling Tan and Executive Director of the Case Centre on Public Leadership, Sarah McAra. It is available on The Case Centre platform for university and government instructors to use in their own teaching.