It’s past midnight in a semiconductor lab deep in one of China’s technology hubs, and the engineers are still working. The room hums with the sound of machines—older, less advanced than state-of-the-art equipment, but pushing forward nonetheless. Each chip they produce feels like a small victory in a silent battle playing out across the world. China’s engineers are racing against time, against sanctions, and, ultimately, against the US in a global competition for technological supremacy. This scene plays out in labs across China, which have become the frontlines in the fight for the future of advanced technology.
The stakes couldn’t be higher. Today, whoever controls the production of semiconductors controls the brains of modern technology—artificial intelligence, smartphones, military systems, and more. And right now, the US is doing everything in its power to ensure that China doesn’t win this race.
The heart of the battle: semiconductors
Semiconductors are more than just tiny chips—they are the foundation of the modern world. Every device, from smartphones to AI systems, runs on semiconductors. In the world of military technology, they are essential for guidance systems and surveillance tools. In the commercial world, they power the massive data centers that fuel AI.
For the US, maintaining an edge in semiconductor technology is about more than commercial success—it’s about security. By controlling access to advanced semiconductors, the US can effectively prevent China from gaining the upper hand in AI and military tech. Washington’s strategy has been clear: use sanctions and export controls to choke off China’s access to the most advanced tools, like extreme ultraviolet (EUV) lithography machines and Nvidia’s AI chips.
In theory, these measures should have slowed China’s progress considerably. After all, without the ability to produce advanced chips, the thinking goes, China would struggle to power the next wave of AI and data-driven innovations. But in practice, reality has proven far more complicated.
Export controls and sanctions
Since 2019, the West has imposed a series of sanctions aimed at curbing China’s access to advanced semiconductors. One of the key tools in these restrictions is blocking the sale of EUV lithography machines, which are essential for manufacturing chips at 7 nanometers and below. These machines, made exclusively by Dutch company ASML, are critical for producing chips with extremely fine resolutions, as they use light wavelengths of 13.5 nanometers to etch intricate patterns onto silicon wafers. Without these machines, China’s chipmakers, like Semiconductor Manufacturing International Corporation (SMIC), are forced to rely on less advanced deep ultraviolet (DUV) systems, which can still produce functional chips but are far less efficient and powerful.
The US has also imposed strict export controls on Nvidia’s most advanced AI chips, including the A100 and H100 series. These chips are central to building supercomputing capabilities and training massive AI models, making them critical for both commercial and military AI applications. By blocking access to these chips, the US aims to slow China’s ability to develop AI systems and maintain a strategic advantage in AI-driven technologies.
SMIC has similarly been hit by restrictions preventing it from acquiring the most advanced chipmaking tools, according to The New York Times. These controls are designed to ensure that China’s top fabs cannot produce chips at the most advanced levels, thereby keeping China’s tech industry several years behind its international competitors.
Despite these significant hurdles, China’s semiconductor industry has continued to advance in ways that have surprised many in Washington.
How has China responded?
In a sprawling facility run by Yangtze Memory Technologies (YMTC) in Wuhan, China, engineers gather around a new piece of silicon, watching intently as their latest creation rolls off the production line. This is no ordinary memory chip. It’s built using what YMTC has dubbed as “Xtacking” technology, a process that stacks memory cells layer by layer, creating a towering structure of data storage. The result? A NAND chip that can hold more data, process it faster, and rival those made by global giants like Samsung and SK Hynix.
Xtacking isn’t just a catchy name. It’s a breakthrough that is said to enable YMTC to compete at the highest level in the world of NAND storage, an area where foreign tech giants like Samsung and SK Hynix have long dominated. By stacking memory cells in layers, YMTC’s chips can squeeze more information into the same space, making them ideal for everything from smartphones to AI systems that demand vast amounts of data processing.
However, it hasn’t been smooth sailing. YMTC’s latest generation of Xtacking chips, built primarily using Chinese tools, came with a hitch. According to Bloomberg, the company had to reduce the number of layers in its newest model compared to the previous version, with the issue boiled down to lower production yields—for every wafer of silicon produced, fewer functional chips emerged compared to earlier models.
It is nonetheless a noteworthy achievement. While other countries rely on advanced foreign machinery, YMTC exemplifies the capability of China’s chipmakers to hold their own against the biggest names in the industry. As demand for memory chips continues to rise, especially with the surge in AI applications, YMTC’s progress signals that China can contend in the semiconductor race, despite the hurdles.
Across China, similar stories are unfolding. SMIC, though hampered by the lack of access to EUV machines, has managed to produce 7-nm chips, a major breakthrough that places it just a few years behind global leaders like TSMC. While these chips are larger and less efficient than their 5-nm counterparts, they represent a significant achievement for China’s domestic industry, showcasing the resilience and innovation of Chinese engineers working with limited tools.
While SMIC’s 7-nm chips constitute a significant step forward, they remain less efficient than the 5-nm chips produced by Taiwan Semiconductor Manufacturing Company (TSMC), the world leader in semiconductor manufacturing. SMIC’s chips are larger and less power-efficient, meaning that, although they can power AI systems and smartphones, they don’t perform at the same level as their foreign counterparts.
This technological gap is largely due to the limitations of China’s domestic equipment. For instance, the country’s most advanced DUV lithography machines operate at a resolution of 65 nm, far behind ASML’s EUV machines, which can achieve resolutions of less than 8 nm (SCMP). These differences may seem small, but in the world of semiconductors, they could represent years of development and billions of dollars in research.
The gap is narrowing, but it’s far from closed.
Innovation unhampered by sanctions
The US sanctions were meant to stifle China’s technological advancements, but a recent analysis presented by the Information Technology and Innovation Foundation (ITIF) at a Capitol Hill event suggests that these efforts may have had the opposite effect in some areas. According to the ITIF’s findings, while China hasn’t overtaken the West in every domain, it is showing remarkable progress in key areas like semiconductors, AI, and electric vehicles. The report highlighted that, in certain sectors, Chinese firms are expected to match or even surpass Western companies within the next decade.
These insights underscored a growing realization: China’s innovation system might be stronger than previously thought.
While US-led export controls have undoubtedly created roadblocks, they have also spurred China’s technology players to press forward with renewed determination. As China accelerates its drive for self-sufficiency, a wave of domestic innovation is pushing the development of robust alternatives more quickly than initially anticipated.
Meanwhile, the US and its allies are considering further export controls to tighten the restrictions on China’s semiconductor industry. With Washington gearing up for the November elections, talks with Japan and the Netherlands have focused on aligning export control regimes, ensuring that companies in these countries follow the same rules as their US counterparts. These new controls could limit the sale of additional chipmaking tools, restrict software updates, and even impact the maintenance of equipment already in use by Chinese firms.
If implemented, these measures could close loopholes that currently allow Chinese firms to continue using some foreign technologies to manufacture advanced chips.
How this chip rivalry between China and the US will play out remains uncertain. China’s progress, though impressive, still lags behind the global leaders. But the country is closing the gap faster than many expected, and its government is pouring billions into research and development to ensure that its momentum continues.
On the flipside, efforts by the US to slow China’s semiconductor growth have led to unintended consequences. Rather than crippling the country’s chip industry, the sanctions appear to have triggered a wave of innovation and domestic ingenuity. Chinese companies like SMIC and YMTC have proven that they can compete—even if they are currently still behind.
Yet, as the gap narrows, the technological race could get unpredictable fast. China’s relentless push for self-sufficiency means that the next few years could reshape the global tech landscape. In a war fought with silicon, the next move is never fully predictable. Both sides are preparing for the long haul, and the outcome could very well define the future of technology for decades to come.
