Technology War over Semiconductors: Strategic Challenges for South Asia and Bangladesh

By Tanvir Rusmat, Dhaka, Dec 24, 2025

The global contest over leadership in the Fourth Industrial Revolution has increasingly centered on semiconductors and rare earth materials (REM). What began as competition in innovation and trade between China and the Western bloc has evolved into a broader struggle over supply chains, technological standards, investment flows, and long-term economic security. This rivalry is now shaping policy choices in emerging economies, particularly across South Asia, including Bangladesh.

Semiconductors have become the most strategic component of the global economy. While the United States and its allies dominate chip design, software, and advanced manufacturing technologies, much of global production capacity and supply chains remain concentrated in Asia. Viewing this dependence as a strategic vulnerability, Western countries have introduced export controls and large-scale industrial subsidies. In response, China has expanded state-backed investment to build a self-reliant semiconductor ecosystem aimed at reducing external dependence and securing technological autonomy.

The International Monetary Fund (IMF) has warned that excessive concentration in strategic sectors like semiconductors creates structural risks for global growth. According to IMF assessments on global economic outlook and supply chain resilience, geopolitical fragmentation of production networks and trade flows is likely to raise costs, fuel inflation, and disproportionately affect developing economies.

Rare earth materials form another critical front in this technology war. REMs are essential for electric vehicles, renewable energy systems, defense technologies, and advanced electronics. Although these materials exist in various regions, China’s dominance in refining and processing remains overwhelming. The World Bank’s Critical Minerals for Development report emphasizes that the main challenge is not raw material availability but limited processing capacity. Without rapid expansion of alternative processing capabilities, the Bank warns that technological transformation and green industrialization could slow worldwide.

This competition has effectively turned the Fourth Industrial Revolution into a contest between governance and development models. China’s state-directed industrial policy allows rapid decision-making and large-scale implementation, while Western economies—despite strong market-driven innovation—often face longer political and regulatory coordination processes. The OECD has cautioned that fragmentation of global technology standards would weaken innovation efficiency and reduce long-term global productivity.

South Asia now sits at the center of this strategic divide. India is actively positioning itself as a semiconductor manufacturing and design hub, strengthening ties with Western partners while expanding state support for domestic capacity. Other South Asian countries are attempting to balance Chinese investment with continued access to Western markets and technologies. The Asian Development Bank (ADB) notes that the region could benefit from supply chain reconfiguration if it prioritizes diversified partnerships and technological skill development, while warning against excessive dependence on any single technology bloc.

For Bangladesh, this evolving landscape presents both opportunities and risks. Potential openings exist in electronics assembly, semiconductor packaging, digital services, and AI-driven human capital development. However, technology decoupling and bloc-based competition could disrupt investment flows, market access, and technology transfer. International assessments suggest that without strategic multilateral engagement, workforce development, and flexible industrial policies, Bangladesh may struggle to benefit from the ongoing technology confrontation.

Ultimately, the rivalry between China and the West over semiconductors and rare earths is structural and long-term. Its outcome will shape global industry, standards, and economic power. For South Asia and Bangladesh, the challenge is not avoiding this conflict, but strategically positioning themselves within an increasingly fragmented global technology order.