The word for lithography machine does not appear once in China’s 15th Five-Year Plan. Neither does wafer fab, extreme ultraviolet, or chip manufacturing. Beijing has stopped fighting the war Washington declared — and started fighting the one that comes next. The chip sanction, meanwhile, has become the primary instrument of great-power digital diplomacy. No one has written the rules for using it. No one has noticed that the target has moved.
By Vladimir Tsakanyan, PhD · Center for Cyber Diplomacy and International Security · cybercenter.space
In October 2022, the Biden administration imposed the most sweeping technology export controls in American history — restrictions on the sale of advanced semiconductors, chip design software, and semiconductor manufacturing equipment to China, designed to deny Beijing the computational substrate on which its AI ambitions depended. The stated objective was to slow China’s progress in artificial intelligence and advanced computing by a generation. The unstated diplomatic objective was to force allied governments — the Netherlands, Japan, South Korea, Taiwan — to align their own export control regimes with Washington’s, creating a multilateral technology denial architecture that no single state could construct unilaterally.
Both objectives have produced results that their architects neither intended nor fully anticipated. The controls disrupted China’s semiconductor ecosystem, caused price spikes, and forced workforce reductions in China’s chip sector. They also prompted Beijing to launch the most ambitious state-directed technology self-sufficiency programme since the Soviet space race — an effort that has already produced startling results, including the December 2025 unveiling by Shanghai’s Jiao Tong University of LightGen, an all-optical chip capable of running advanced AI models at energy efficiencies exceeding Nvidia’s A100. TrendForce projects that by the end of 2026, domestic Chinese chips will account for fifty percent of China’s AI chip market — up from ten to fifteen percent before the controls were imposed.
The sanctions intended to deny China advanced semiconductor capability have accelerated China’s development of advanced semiconductor capability. This is not a paradox. It is a predictable consequence of applying export control logic — developed in an era of nuclear non-proliferation, when the technology in question was genuinely scarce and the target state lacked indigenous alternatives — to a domain where the target state has the industrial capacity, the financial resources, and the political will to build what it cannot buy. The chip sanction is the primary instrument of great-power digital diplomacy in 2026. It is also, in its current form, a diplomatic instrument that is generating consequences no diplomatic framework was designed to manage.
The Sanction as Alliance Commitment
The October 2022 controls were not, in their initial form, multilateral. They were unilateral American restrictions, imposed abruptly, that immediately disrupted the supply chains of allied semiconductor companies — ASML in the Netherlands, Tokyo Electron and Shin-Etsu in Japan, Samsung and SK Hynix in South Korea — whose commercial exposure to the Chinese market was substantial and whose governments had not been consulted before the restrictions were announced. The Atlantic Council’s contemporaneous assessment was direct: the abrupt imposition of the controls caused upset in several capitals, and the subsequent opaque agreement among the US, Japan, and the Netherlands may have only deferred a diplomatic reckoning rooted in core commercial interests.
What followed was an eighteen-month diplomatic campaign — conducted through bilateral channels, alliance frameworks, and bilateral pressure that stopped well short of formal treaty commitment — to persuade allied governments to impose equivalent restrictions on their own semiconductor companies’ sales to China. The campaign largely succeeded. Japan, the Netherlands, South Korea, and Taiwan all imposed varying degrees of aligned export controls. The alignment was achieved not through any multilateral instrument but through a combination of American pressure, shared threat perception, and the calculation by allied governments that the alternative — being excluded from US technology partnerships — was worse than the commercial cost of the restrictions.
This process created something that no treaty established: a de facto technology alliance whose binding force derived not from a signed agreement but from the mutual dependencies that American pressure had both exploited and deepened. Countries that aligned with US chip controls found themselves embedded in a technology partnership architecture — preferential access to US AI infrastructure investment, inclusion in semiconductor supply chain agreements, intelligence-sharing arrangements — that would be difficult and costly to exit. Countries that did not align found themselves on the wrong side of a technology partition whose consequences would compound over time.
Analyst note
The Wassenaar Arrangement — the multilateral export control regime nominally governing dual-use technology transfers — is structurally incapable of managing the chip diplomacy problem. Adding items to a Wassenaar control list requires consensus from all participating states, including Russia, whose interests in the current geopolitical environment are directly opposed to effective technology denial targeting China. Opportunities for additions occur roughly once annually. The semiconductor technology landscape changes faster than that. The result is that the most consequential technology export control regime of the current era operates entirely outside the multilateral framework designed to govern it — through bilateral agreements, unilateral US action, and allied pressure that creates alliance commitments without alliance treaties. This is not a design choice. It is a structural gap that no policy discussion has proposed filling.
The Countries Caught in the Middle
The technology sanction as diplomatic instrument creates a category of states for whom it is uniquely costly: countries with significant commercial relationships in both the American and Chinese technology ecosystems, insufficient leverage to resist pressure from either side, and no multilateral framework within which to assert a neutral position. Southeast Asia is the primary geography of this problem in 2026. Six of the eleven nations of the region are making concerted efforts to develop roles in the global semiconductor supply chain — precisely the moment when the supply chain is being reorganised along geopolitical alignment lines that these states did not choose and cannot control.
A Vietnamese semiconductor packaging facility that serves both American and Chinese customers is not a diplomatic actor making a foreign policy choice. It is a business making commercial decisions in a regulatory environment that is being restructured around geopolitical categories it has no standing to contest. When the US Entity List adds a Chinese firm that is also a major customer of that facility, the Vietnamese government faces a choice it was not asked to make: align with US controls and absorb the commercial loss, or continue normal business and risk secondary sanctions exposure that could sever its access to the American market and to the American technology partnerships that define its development trajectory.
India, which has positioned itself as a technology partner of strategic importance to both the United States and to its own aspirations for semiconductor manufacturing independence, has navigated this tension with more diplomatic agility than most — cultivating preferential access to US chip technology investment while maintaining sufficient strategic autonomy to avoid becoming a simple extension of the American technology containment strategy. Whether this balance is sustainable as the technological partition deepens is the central question of Indian digital statecraft over the next decade.
The chip sanction has done more to reshape the US-China relationship in three years than two decades of trade negotiation — and produced consequences that no diplomat anticipated and no framework exists to manage. That is not evidence of its effectiveness. It is evidence of its danger.
Beijing’s Strategic Reframe
The most analytically significant development in technology statecraft in the first quarter of 2026 is one that most Western commentary has not processed: the word for lithography machine does not appear in China’s 15th Five-Year Plan. Neither does wafer fab, extreme ultraviolet, or chip manufacturing as a primary strategic objective. What appears instead is a different strategic vocabulary — one in which artificial intelligence references outnumber integrated circuit references by roughly thirteen to one, and in which computing power receives its own dedicated chapter for the first time in Five-Year Plan history.
The plan introduces a new planning term: 模芯云用 — “model-chip-cloud-application” — a compound that encodes a formal architectural shift in how Beijing conceptualises the technology competition. Where the previous plan measured success by chip production volumes, the 15th plan measures success by digital economy penetration: a target of twelve and a half percent of GDP from the digital economy by 2030. Beijing is no longer measuring success by how many chips it produces. It is measuring success by how deeply computing infrastructure penetrates the economy. The 70 percent semiconductor self-sufficiency target from Made in China 2025 — a target China missed by roughly fifty percentage points — has been quietly deleted.
The strategic implication is significant and has not yet been absorbed into Western policy analysis. US chip export controls were designed to deny China the fabrication capability to produce leading-edge semiconductors. China’s 15th Five-Year Plan describes a strategy that bypasses that constraint by making the fabrication layer one component of a four-layer architecture — model, chip, cloud, application — whose other three layers are developing without equivalent Western countermeasures. The plan’s national security chapter explicitly prepares counter-strategies for each of the three primary instruments of US economic coercion: counter-sanctions, counter-interference, and counter-long-arm jurisdiction. Beijing does not name the adversary. It prepares specifically for each of the adversary’s methods. The chip war Washington declared is the one Beijing has stopped fighting. The one Beijing is now fighting has no equivalent Western response.
Analyst note
The Trump administration’s January 2026 decision to permit the export of Nvidia H200 chips to China — reversing the Biden administration’s presumption of denial with a case-by-case review framework — illustrates the internal contradiction at the heart of American chip diplomacy. Congressional hawks, including the House Foreign Affairs Committee, pushed back immediately, arguing that the administration was providing Chinese military-adjacent entities with the computational substrate they needed. The administration’s position — that controlled access under specific conditions was preferable to driving China toward complete self-sufficiency — is analytically defensible. The problem is that the same argument can be made at progressively higher performance thresholds indefinitely, and the enforcement infrastructure required to validate “specific conditions” at scale does not exist. The Bureau of Industry and Security, as assessments have consistently noted, has been chronically under-resourced relative to its mandate. The gap between the export control policy on paper and the export control regime in practice is the space in which Chinese entities have continued to acquire controlled semiconductors despite the restrictions.
The Absence of Rules — and What It Produces
The technology sanction has, in less than four years, become the most consequential instrument of great-power digital diplomacy. It has reshaped supply chains, created de facto alliance commitments, restructured the strategic calculus of dozens of third-party states, and triggered the largest state-directed technology mobilisation in the history of the People’s Republic. It has done all of this in the absence of any agreed framework — no treaty, no multilateral instrument, no reciprocal obligation structure, and no escalation management mechanism.
The analogy to nuclear deterrence is instructive and limited. Nuclear deterrence developed, through a combination of near-catastrophes and sustained diplomacy, a set of norms, red lines, and communication channels that allowed adversaries to manage a competition whose escalatory potential was genuinely existential. The process was slow, contested, and imperfect. It nonetheless produced the Hotline Agreement, the NPT, the SALT and START treaties, and a body of strategic doctrine that reduced, if it did not eliminate, the risk of miscalculation. Technology sanctions have produced none of these things. There are no agreed thresholds. There are no communication channels for crisis management. There are no reciprocal constraints. There is no agreed vocabulary for distinguishing legitimate national security measures from economic coercion. The escalation dynamics of chip diplomacy are therefore unconstrained in precisely the way that nuclear escalation dynamics, at their most dangerous, were not.
What a responsible technology sanctions regime would require — in its minimal form — is a set of agreed definitions (what constitutes a controlled technology, and by what criteria), a multilateral institutional vehicle capable of updating those definitions at a pace commensurate with technological change, a mechanism for third-party states to contest designations that harm their legitimate commercial interests, and a crisis communication channel through which the major powers can signal intent and avoid miscalculation. None of these exist. Building them would require the United States to accept constraints on a policy instrument it currently deploys unilaterally and regards as a competitive advantage. It would require China to acknowledge that its technology development ambitions are subject to legitimate international scrutiny. It would require allied states to accept obligations they currently discharge informally, under pressure, without the protections that a formal framework would provide.
These are significant political costs. They are also the minimum price of an arrangement that does not produce, through the accumulation of unmanaged escalatory dynamics, consequences more damaging than the technology competition it is intended to manage.
Bottom line assessment
The semiconductor export control regime is the most consequential unilateral act of economic statecraft since the Nixon shock of 1971 — and, like that event, it has restructured global economic relationships in ways that its architects did not fully anticipate and that no existing multilateral framework is equipped to manage. Its diplomatic consequences — for allied relationships, for third-party states caught in the middle, and for the escalatory dynamics of US-China technology competition — have outrun the governance architecture available to contain them. Meanwhile, Beijing has absorbed the strategic lesson of the chip war and reframed its ambitions at a level that current US export controls do not address. Washington is winning the battle it declared. Beijing is preparing for the one that follows. The absence of any agreed framework for managing technology economic coercion — no agreed definitions, no multilateral instrument, no escalation management mechanism — means that the most powerful new instrument of digital statecraft operates in a governance vacuum whose risks compound with every iteration. Building that framework requires political costs that no major actor has yet been willing to pay. The alternative is a technology competition managed entirely by unilateral action, miscalculation, and the structural incentives of an arms race that neither side is equipped to end.
This is Article 4 of the series “Digital Diplomacy & Power.” Previous: The Algorithmic Envoy — Social Platforms, Geopolitics, and the Battle for Diplomatic Narrative. Next: The Digital Neutral — Small States and the Most Valuable Diplomatic Asset of the Decade. All articles available at cybercenter.space.
#Semiconductor #Diplomacy #Export #Controls #Technology #Statecraft #US-China #Competition #Digital Diplomacy #Economic #Coercion #Chip #War #Vladimir Tsakanyan
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