AI is seen as the last innovation that has been made. After that, only developments from AI will create further development of mankind. But AI is not something artificial “in the space” – it has steel and minerals as a basis, built into AI chips. Now, the complex dynamics of AI chip production in the USA reveal a deep interdependence on global semiconductor supply chains, especially those involving China. American semiconductor companies have long led the development of advanced AI chips, but their manufacturing and material sourcing rely significantly on resources and supply chains that span multiple countries, prominently including China. This relationship is shaping geopolitical and economic landscapes in profound ways in 2025.
US AI Chip Production, Chinese Material Dependency, and the Global Semiconductor Supply Chain
AI chips, the specialized processors powering modern artificial intelligence systems, depend on essential base materials such as high-purity silicon, aluminum, copper, gallium, germanium, palladium, and rare earth elements like neodymium and cobalt. High-purity alumina (HPA) is critical for chip insulation, with China controlling a dominant share of this market, although efforts in the US are growing. Silicon, the foundational element of semiconductors, requires advanced refining capabilities primarily situated in Japan, South Korea, and China. The fabrication of leading-edge AI chips is complex and capital-intensive, involving cutting-edge lithography and production hubs concentrated in East Asia, notably Taiwan’s TSMC, which manufactures chips for major American companies like Nvidia, AMD, and Apple. Within China, tech giants such as Huawei and Baidu are rapidly advancing their AI chip development, though they still depend on certain US semiconductor technologies for optimal performance.
Tariffs, Export Controls, and the Shifting US-China Semiconductor Trade War
The United States has sought to maintain its technological dominance and safeguard national security interests by imposing export controls and semiconductor tariffs on advanced AI chip technology destined for China. These controls encompass restrictions on chips themselves and on critical manufacturing equipment, such as extreme ultraviolet (EUV) lithography tools essential for next-generation semiconductors.
In a major shift under recent trade policy changes, Nvidia and AMD reached agreements to pay the U.S. government 15% of their AI chip revenue from sales to China in exchange for special export licenses. This move illustrates the delicate balance between protecting national interests and capitalizing on the lucrative Chinese chip market. While this revenue-sharing model contrasts with earlier attempts to fully restrict exports, it highlights a key risk: encouraging China to scale up domestic semiconductor production and reduce reliance on US technology.
Europe’s Chip Sovereignty Drive and the AI Semiconductor Race
In contrast, Europe is charting a unique path in the AI semiconductor race. While home to major chip industry players like Infineon Technologies, STMicroelectronics, and GlobalFoundries, Europe has historically lagged behind the US and East Asia in producing leading-node AI processors. Through the EU Chips Act and substantial state-backed funding, the European Union aims to reduce dependency on Asian chipmakers and secure technological sovereignty.
Germany, in particular, is set to host one of the most advanced semiconductor fabrication plants outside the US, bolstering Europe’s role in AI chip manufacturing. Rather than entering a direct trade confrontation like the US and China, Europe’s strategy focuses on building indigenous chip design and fabrication capabilities while attracting foreign semiconductor investment. However, the scale of EU initiatives still falls short compared to the massive manufacturing capacity of Asia’s chip giants.
The AI chip landscape in 2025 underscores a high-stakes global competition where semiconductor supply chains, rare earth material access, and geopolitical trade policies define the pace of innovation. The US is balancing between export controls and market access to China, Europe is investing in semiconductor independence, and Asia remains the manufacturing powerhouse — making AI chips a key battleground in the global technology race. Seems, that the next wave of innovations is still coming from China – if Trump allows it.
