Eduardo Araral The Chip War Has Settled Into a Tense New Normal

Ignite Issue 03

11 Nov 2026

The Chip War Has Settled Into a Tense New Normal

“Nobody wins in total war.”

Associate Professor Eduardo Araral

Lee Kuan Yew School of Public Policy

Ignite Issue 03

11 Nov 2026

The Chip War Has Settled Into a Tense New Normal

“Nobody wins in total war.”

Associate Professor Eduardo Araral

Lee Kuan Yew School of Public Policy

Tit-for-tat export controls between the United States and China have sent shockwaves through the global semiconductor value chain. But amid the turbulence, Associate Professor Eduardo Araral from the Lee Kuan Yew School of Public Policy sees the contours of a new equilibrium forming – one that can be understood by systematically mapping out the capabilities and strategic preferences of global players.

Assoc Prof Araral contends that the global semiconductor market is headed towards partial bifurcation along strategically sensitive nodes, forming parallel ecosystems led separately by the United States and China. However, the two economies are still deeply intertwined for now, and following the Trump-Xi summits in May and September 2026, “some strategic clarity” has emerged in their near-term relationship.

How we got here

The opening shots were fired in President Trump’s first term, when he placed the Chinese tech giant, Huawei, on a trade restriction list and cut the firm off from chips made with American technology. The Biden administration broadened that campaign by restricting China’s access to advanced chips, chipmaking equipment, and the expertise to use them. US allies followed suit – Japan and the Netherlands curbed exports of the advanced lithography equipment their firms produce. Beijing retaliated with escalating export restrictions on critical minerals essential to chipmaking, such as gallium and germanium.

When President Trump took office in his second term, he reached for a blunter instrument: tariffs. However, “China didn’t blink,” explained Assoc Prof Araral. “[Trump] knew that China will not blink. So he pulled back.” After their Beijing summit in May, it became clear that the two powers plan to cooperate on non-sensitive chips, while applying selective reciprocity on more sensitive trades. Given how co-dependent the two nations are, breaking off economic ties entirely would be, as Assoc Prof Araral put it, “shooting [themselves in] their own foot.”

Nobody wins in total war.

Where the battle lines are drawn

Both sides are buying time so they can build their own supply chains – an effort that will take decades. But not every part of this vast supply chain is contested. The fault lines are splintered along a few strategically sensitive nodes: chips at and below the four-nanometre threshold, which are advanced enough to power AI systems and military applications; the specialised equipment needed to make these chips; and the critical minerals dominated by China.

For the rest of the value chain, however, it is business as usual. “Smartphones, PCs, cars, gaming devices – those are not four-nanometre chips,” Assoc Prof Araral pointed out. Downstream operations like packaging and testing, carried out in hubs such as Penang, Singapore, Vietnam, and the Philippines, also remain largely unaffected.

How countries and firms are hedging their bets

Many countries have signed on to Pax Silica, the US-led alliance launched in December 2025 to secure semiconductor supply chains, critical minerals, and AI infrastructure among trusted partners. But many of those same countries are also members of the Belt and Road Initiative, China’s global infrastructure and investment programme. “It’s not a clear cut, ‘I’m on the US or China’s side’,” said Assoc Prof Araral. “Countries choose what is in their best interest.”

Tech giants, on the other hand, are scrambling to secure long-term chip supply from TSMC, the Taiwanese foundry giant at the heart of advanced chipmaking, and investing heavily in export compliance systems. They are also diversifying their operations geographically: TSMC is building fabs in America and Japan, while Apple is expanding operations in India.

Some firms are looking beyond securing supply, to rethink where and how AI processing happens. NVIDIA, for instance, recently unveiled chips designed to bring AI capabilities directly into laptops and desktop computers, to reduce dependency on centralised data centres. Meanwhile, major cloud providers – like Google, Amazon, and Microsoft – are designing their own chips to reduce their reliance on NVIDIA.

What comes next

For the near future, Assoc Prof Araral predicts that countries “already in the value chain will keep their positions.” Though some countries with large markets and deep talent pools may gain a bigger share over time, while others may leverage geopolitical bargaining chips to inch up the chain.

But the four-nanometre dividing line between what is contested and what is not is unlikely to shift anytime soon, he said. For China, US-led restrictions have only sharpened its resolve to develop homegrown alternatives in advanced chipmaking and AI. NVIDIA CEO Jensen Huang has repeatedly warned that China is just “nanoseconds behind” America in AI capabilities, a view Assoc Prof Araral shares.

With abundant energy, vast engineering talent, strategic mineral reserves, and the political will to press ahead, China has everything it needs to close the gap. “It’s a matter of national security, a matter of national pride,” said Assoc Prof Araral. Achieving tech sovereignty, he argued, is “just a matter of time.”

This article was first published in Ignite Magazine, Issue 03.

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How countries and firms are hedging their bets

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