The Semiconductor Sovereignty Race

The semiconductor industry has always been global — design in the US, manufacturing in Taiwan and South Korea, assembly in Southeast Asia, sales everywhere. This globalisation was a source of efficiency and innovation for decades. It is now a source of geopolitical vulnerability that governments around the world are spending hundreds of billions of dollars to address. The CHIPS and Science Act in the United States, the European Chips Act, and similar initiatives in Japan, South Korea, India, and China represent the largest government intervention in the semiconductor industry since the Cold War — and they are reshaping the investment landscape in ways that will play out over decades.

The immediate catalyst was the US export control regime imposed on advanced semiconductors and chip-making equipment destined for China. The October 2022 controls — subsequently tightened in October 2023 — effectively cut off China's AI industry from access to the most advanced Nvidia chips and from the ASML lithography equipment required to manufacture them domestically. The strategic intent was to slow China's AI development by denying it access to the compute required to train frontier models. The practical effect has been to accelerate China's investment in domestic semiconductor development and to create a bifurcated global chip market.

For investors, the semiconductor sovereignty race creates opportunities at multiple levels. The most direct opportunity is in the companies building the new semiconductor manufacturing capacity that governments are subsidising — TSMC's Arizona fab, Intel's Ohio expansion, Samsung's Texas facility. These are long-duration infrastructure investments with government support, which provides a degree of downside protection that pure commercial semiconductor investments lack. The more speculative opportunity is in the Chinese semiconductor ecosystem — companies developing domestic alternatives to Western chips and equipment that will benefit from the forced substitution that export controls are driving.

At Lensbridge, we view the semiconductor sovereignty race as a multi-decade investment theme that will reshape supply chains, create new national champions, and generate significant opportunities for investors who understand the technology and the geopolitics. Our investment in Tessolve — a leading semiconductor services company — reflects our conviction that the infrastructure supporting semiconductor development is as important as the chips themselves.