The global semiconductor landscape is undergoing a seismic shift, and the United States is racing against time to maintain its strategic advantage. According to a recent analysis citing Taiwan’s DSET, China is on track to surpass Taiwan as the world’s leading producer of foundational chips by 2027. This rapid ascent has exposed critical vulnerabilities in the current international export control regime, prompting urgent calls for the U.S. to rally its allies and establish a more robust, multilateral framework for restricting semiconductor manufacturing equipment (SME).
In a comprehensive assessment published by Just Security, experts Sylvia Chen and Peter Tozzi outline the pressing need for a modernized approach to technology export controls. As the U.S.-China tech war intensifies, the focus has increasingly shifted from merely restricting the sale of advanced chips to choking off the supply of the highly specialized machinery required to manufacture them. However, achieving this goal requires unprecedented coordination among a select group of allied nations that dominate the SME market.
The Collapse of the Wassenaar Arrangement
For decades, the international community relied on the Wassenaar Arrangement to govern the export of conventional arms and dual-use goods and technologies. Established in 1996 and comprising 42 member states, the agreement was designed to promote transparency and greater responsibility in transfers of sensitive technologies. However, the Wassenaar Arrangement has proven woefully inadequate in addressing the rapid advancements and geopolitical realities of the modern semiconductor industry.
The fundamental flaw of the Wassenaar Arrangement lies in its consensus-based decision-making process. Since the escalation of global tensions in 2022, Russia has effectively paralyzed the organization by vetoing any proposed updates to the control lists. This deadlock has rendered the arrangement obsolete in the face of fast-moving technological developments, leaving individual nations to implement a patchwork of unilateral or limited multilateral controls that are easily circumvented by determined state actors.
Loopholes in the Trilateral Agreement
Recognizing the limitations of the Wassenaar Arrangement, the United States spearheaded a landmark trilateral agreement with the Netherlands and Japan in 2023. This coalition was strategically significant, as these three nations are home to the world’s leading manufacturers of advanced semiconductor fabrication equipment. The deal successfully banned the export of the most advanced deep ultraviolet (DUV) immersion lithography machines to China and required strict licensing for older models.
Despite this diplomatic breakthrough, significant gaps remained in the enforcement architecture. Before the Netherlands officially amended its export rules in September 2024, Chinese semiconductor firms engaged in an aggressive stockpiling campaign, importing vast quantities of older DUV immersion machines. While these older models are not inherently designed for cutting-edge nodes, Chinese engineers have ingeniously utilized a technique known as multi-patterning. By running silicon wafers through the lithography process multiple times, they can achieve the dense circuitry required for more advanced chips, effectively bypassing the intent of the export controls. This technological workaround underscores the difficulty of containing a highly motivated and well-resourced domestic industry that is determined to achieve self-sufficiency.
The Vision for “CoCom 2.0”
To close these loopholes and establish a more airtight regime, policy experts are advocating for the creation of a “CoCom 2.0.” This proposed framework draws inspiration from the Coordinating Committee for Multilateral Export Controls (CoCom), which successfully restricted the flow of strategic technologies to the Soviet bloc during the Cold War.
The envisioned CoCom 2.0 would be a tightly knit coalition comprising the United States, Japan, the Netherlands, Germany, South Korea, and Taiwan. By uniting the indispensable nodes of the global semiconductor supply chain, this alliance could implement highly targeted and uniformly enforced controls on semiconductor manufacturing equipment. Unlike the unwieldy Wassenaar Arrangement, this smaller, ideologically aligned group could respond swiftly to technological advancements and emerging threats, ensuring that export restrictions remain relevant and effective in real-time.
Legislative Momentum and the STRIDE Act
The push for stronger multilateral coordination is gaining significant traction within the halls of the U.S. Congress. In April, the House Foreign Affairs Committee advanced the STRIDE Act (H.R. 6058), a crucial piece of legislation aimed at formalizing and accelerating these diplomatic efforts. If enacted, the STRIDE Act would mandate the State Department to actively coordinate with allied nations to align export control policies across the entire semiconductor supply chain.
This legislative momentum reflects a growing bipartisan consensus that unilateral actions by the United States are insufficient to curb China’s technological ambitions. The global nature of the semiconductor industry means that any unilateral restriction simply creates an opportunity for foreign competitors to fill the void, undermining U.S. companies without achieving the desired national security objectives. The STRIDE Act represents a strategic pivot toward a more collaborative and comprehensive approach to economic statecraft, recognizing that allied unity is the ultimate force multiplier.
Taiwan’s Critical Role and the FDP Rule
Any effective multilateral export control regime must inherently include Taiwan, the undisputed epicenter of global semiconductor manufacturing. The integration of Taiwan into this framework is already underway through bilateral agreements. Notably, Article 5.2 of the U.S.-Taiwan Initiative on 21st-Century Trade (ART) obligates Taiwan to incorporate the Foreign Direct Product (FDP) Rule into its domestic export control regulations.
The FDP Rule is a powerful extraterritorial tool that allows the U.S. government to restrict the sale of foreign-made products manufactured with U.S. technology, software, or equipment. By adopting this rule, Taiwan effectively aligns its export control mechanisms with those of the United States, creating a formidable barrier against the unauthorized transfer of advanced semiconductor capabilities to China. This alignment is crucial, given Taiwan’s unparalleled expertise and capacity in chip fabrication, and it sets a precedent for other allied nations to follow.
Historical Precedent: The Battle Act Analogy
The historical precedent for such aggressive and coordinated economic statecraft is well-established. Analysts frequently draw analogies to the Mutual Defense Assistance Control Act of 1951, commonly known as the Battle Act. This legislation served as the backbone for the original CoCom, threatening to withhold U.S. foreign assistance from any nation that exported strategic materials to the Soviet bloc.
While the geopolitical dynamics of the 21st century are vastly different, the underlying principle remains the same: the United States must leverage its economic and diplomatic influence to compel allied cooperation. The success of a modern CoCom 2.0 will depend not only on shared security concerns but also on the U.S.’s ability to offer compelling incentives and, if necessary, credible deterrents to ensure strict compliance among its partners. The historical success of the Battle Act demonstrates that economic leverage, when applied strategically, can forge enduring and effective multilateral coalitions.
The Path Forward for Global Tech Security
As China accelerates its drive toward semiconductor self-sufficiency, the window of opportunity for the United States and its allies to shape the industry’s future is rapidly closing. The anticipated milestone of China surpassing Taiwan in foundational chip production by 2027 serves as a stark reminder of the stakes involved. Foundational chips, while not the most advanced, are the lifeblood of the modern economy, powering everything from automotive systems and consumer electronics to critical military infrastructure.
The transition from the outdated Wassenaar Arrangement to a dynamic, targeted coalition like CoCom 2.0 is no longer a theoretical policy option; it is an urgent national security imperative. By closing existing loopholes, aligning regulatory frameworks, and fostering deep cooperation among the world’s leading technological powers, the U.S. can establish a resilient defense against the unchecked proliferation of semiconductor manufacturing capabilities. The coming years will test the resolve and diplomatic agility of the United States as it seeks to forge a united front in the defining technological contest of our time. For more on the semiconductor rivalry, see EastFrontier’s coverage on China’s CPU makers gaining ground in the AI race.