The Semiconductor Cold War: How Taiwan's Export Controls Are Fueling China's Tech Self-Reliance and Shaping Global Chip Markets

The strategic chess game between Taiwan, the U.S., and China over semiconductor technology has reached a critical juncture. On June 10, 2025, Taiwan's Ministry of Economic Affairs added Huawei Technologies and Semiconductor Manufacturing International Corp (SMIC) to its Strategic High-Tech Commodities (SHTC) export control list, requiring Taiwanese firms to seek government approval before exporting critical chipmaking equipment, materials, or technologies to these entities. This move, part of a broader alignment with U.S. sanctions, marks a pivotal escalation in the global semiconductor cold war. The implications are profound: China's drive for self-reliance in semiconductors is accelerating, reshaping supply chains and creating both risks and opportunities for investors in Chinese tech firms.

The New Reality: Taiwan's Export Controls and China's Response

Taiwan's controls, effective since June 2024 but tightened in mid-2025, directly target Huawei's AI ambitions and SMIC's efforts to catch up in advanced chip production. These measures aim to block Chinese access to 7-nanometer and more advanced semiconductor technologies, which are critical for AI accelerators, 5G infrastructure, and military applications. While U.S. sanctions had already restricted Huawei and SMIC's access to TSMC-manufactured chips, Taiwan's move closes a loophole: Chinese firms can no longer rely on Taiwanese suppliers to bypass U.S. rules.

The immediate impact on China is twofold. First, it forces Huawei to delay its plans to mass-produce the 910C AI chip, which was slated for large-scale shipments by July 2025. Second, it accelerates China's push to build domestic chipmaking capacity. Beijing's “China Chip 2.0” strategy, unveiled in 2023, has already allocated $1.4 trillion to semiconductor development through 2030. The new export controls will likely intensify this effort, even if progress remains uneven.

The Geopolitical Tightrope: Self-Reliance vs. Reality

Despite Taiwan's restrictions, China has made strides in semiconductor self-reliance. SMIC's 7nm chip for Huawei's Mate 60 smartphone in 2023 marked a breakthrough, albeit with yields at just one-third of TSMC's advanced nodes. reveals that while SMIC's revenue has doubled since 2020, it remains dwarfed by TSMC's $80 billion annual revenue. Yet China's focus on mature-node (14nm and above) chips—a sector where it already holds 34% global market share—could shift the balance. By 2027, projections suggest China's mature-node share could rise to 47%, overtaking Taiwan's 43% dominance.

This shift has strategic implications. Mature-node chips are essential for consumer electronics, automotive systems, and industrial IoT devices—markets that account for 70% of global chip demand. By focusing here, China can reduce its reliance on Taiwan for non-advanced applications while continuing to challenge U.S. sanctions in cutting-edge sectors.

Investment Implications: Riding the Wave of Self-Reliance

For investors, the calculus is clear: China's semiconductor self-reliance is a long-term trend, but execution risks remain.

1. Winners in Mature-Nodes: Companies like Semiconductor Manufacturing International Corp (SMIC) and Yangtze Memory Technologies (YMTC) are pivotal to China's mature-node ambitions. While SMIC's advanced-node yields lag, its mature-node factories are nearing full capacity. Investors should monitor SMIC's stock performance relative to TSMC, as it could signal market confidence in China's progress.

2. Supply Chain Winners: Firms providing equipment and materials for mature-node fabrication—such as Shanghai Micro Electronics (SMEE) for lithography tools or Jiangsu Suokang for photoresists—could see surging demand.

3. Global Supply Chain Risks: The bifurcation of supply chains into “democracy” and “autocracy” blocs could create volatility. Taiwanese firms like TSMC and UMC, which now face stricter export rules, may see short-term earnings pressure but remain critical for advanced chip demand.

4. U.S. and EU Countermeasures: The CHIPS and Science Act and EU's Chips Act aim to reduce reliance on Taiwan. Investors should track how U.S. firms like Intel (INTC) or GlobalFoundries (GFS) fare against Taiwanese competition in mature-node markets.

Risks and Caution Flags

While China's self-reliance drive is undeniable, it faces hurdles. Its advanced-node gap with Taiwan (2-3 generations behind) and reliance on imported lithography equipment (80% of which comes from ASML in the Netherlands) limit near-term breakthroughs. Additionally, Taiwan's controls may inadvertently accelerate China's use of third-party intermediaries or shell companies to bypass restrictions, a risk already highlighted by U.S. authorities.

The Bottom Line: A Dual-Track Investment Strategy

Investors should adopt a dual approach:

• Long-Term Play: Allocate to Chinese mature-node firms (SMIC, YMTC) and supply chain enablers (SMEE), which benefit from China's structural push for self-reliance.

• Short-Term Caution: Avoid overexposure to Chinese advanced-node players until yields improve and supply chain diversification matures.

• Global Diversification: Balance with exposure to Western firms (e.g., ASML, Lam Research) and Taiwanese companies (TSMC) that dominate critical technologies.

The semiconductor cold war is reshaping global markets, and China's determination to achieve self-reliance is a force to reckon with. For investors, the challenge is to navigate the turbulence while positioning for the next phase of this high-stakes technological arms race.

The prize? A slice of an industry worth $600 billion today and growing—driven by AI, autonomous vehicles, and the metaverse. The next move is China's.