We at The Free Press are Doomberg fans. Writing under a pen name, the Doomberg team offers a skeptical, shrewd, and often humorous take on economic policy around the world. Visit Doomberg’s website, where a version of this piece was originally published.
“Necessity never made a good bargain.” —Benjamin Franklin
Each day, in the heart of double-decker–size machines, acts indistinguishable from magic are performed. Powerful lasers fire thousands of pulses per second at microscopic droplets of ultrapure tin, generating a steady plasma that emits extreme ultraviolet (EUV) light with a wavelength of just 13.5 nanometers (nm). That light is collected by an array of cutting-edge mirrors—each crafted with unprecedented precision, material-science innovation, and engineering complexity—and redirected to etch features smaller than 10 nm onto thinly sliced wafers of the world’s highest-quality polysilicon.
Advanced EUV lithography machines sit at the technological frontier of what is arguably the most important industry in the global economy: the manufacture of high-performance semiconductor chips used in demanding computing applications. While predecessor deep ultraviolet (DUV) machines remain the global workhorses for producing chips found in cars, appliances, and various industrial devices, EUV machines are essential to artificial intelligence technology. Today, the Dutch company ASML holds a monopoly on EUV machine production and sports a market cap exceeding $270 billion as a result.
Given the military implications of AI’s potential, the U.S. has pursued an aggressive strategy of preemptively sanctioning Chinese technology firms—measures designed to prevent any company wishing to operate within the U.S. dollar-based financial system from aiding China’s AI development. For years, ASML has been prohibited from selling EUV to China, while leading U.S.-based chip designer Nvidia has been instructed not to sell its most powerful products there.
The common perception is that these sanctions have largely succeeded in stalling China’s progress and keeping it years behind the best of the West. But news broke last week that should call into question the entire sanctions strategy:
Huawei Technologies, China’s tech titan, is making waves with its latest AI chip, the Ascend 910D, set to rival Nvidia’s industry-leading H100 processor. Announced on 27 April 2025, this move marks a bold step in China’s quest to break free from U.S. tech dominance, especially as Washington tightens export controls on advanced chips. . . .
Meanwhile, the 910C, already in early shipments, is slated for mass production next month, filling the void left by Nvidia’s restricted H20 chip, which now requires an export license. Huawei claims the 910D could surpass the H100’s performance, a feat that would disrupt Nvidia’s 80% grip on the global AI chip market, according to The Wall Street Journal.
From the outset of the war in Ukraine, we argued that sanctions against Russian energy would backfire. More than three years later, Russia weathered the sanctions storm, emerging stronger than it had been before—a result sharply at odds with the narrative still being peddled by Western legacy media. Semiconductors are not energy commodities, of course, but attempting to corral their development through sanctions against China was destined for a similar fate.
Today, we sharpen that view into a broader thesis with serious repercussions for Western foreign policy and the future of the U.S. dollar itself: Sanctions against powerful countries are always a losing tactic, weakening the West and strengthening its geopolitical adversaries. Let’s look at recent developments in the semiconductor race to explain why.
Sanctions designed to arrest economic activity—the sale of Russian oil and development of Chinese semiconductors alike—may increase the frictional costs of commerce or push much of it into the shadows, but they rarely make a meaningful dent in it. A vast network of intermediaries stands ready to take a cut for their expertise in skirting such restrictions. In the case of semiconductors, Nvidia’s most advanced chips continue to flood into China through illicit channels, leaving U.S. officials playing an endless game of whack-a-mole. So far, the mole is winning, as Bloomberg explains:
U.S. officials are probing whether Chinese AI start-up DeepSeek bought advanced Nvidia Corp. semiconductors through third parties in Singapore, circumventing U.S. restrictions on sales of chips used for artificial intelligence tasks, people familiar with the matter said.
DeepSeek recently released a chatbot, called R1, that in some respects performs as well as comparable tools from the U.S., suggesting that China is further ahead in the AI race than previously believed. Some prominent engineers have marveled at R1’s capabilities, and DeepSeek has touted the tool’s low cost and efficiency, prompting rivals to speculate whether it was built on the back of Western technology.
Adding to the challenge is that Western companies quietly loathe sanctions and routinely comply with only the narrowest interpretation of the law—while blatantly violating its spirit. Entire books have been written about Huawei’s rise, facilitated by foreign firms chasing elusive growth in China’s enormous domestic market. Such practices continue to this day. As The Information reported last week:
Nvidia has told some of its biggest Chinese customers, including ByteDance, Alibaba Group, and Tencent Holdings, that it is tweaking the design of its artificial intelligence chips so they can be sold to Chinese businesses without running afoul of U.S. export regulations, according to three people involved in the conversations. . . .
Nvidia has repeatedly modified AI chips for the Chinese market over the past three years, since the U.S. started restricting [the] sale of cutting-edge chips to China on the grounds that accessing the crucial technology will aid Beijing’s military rise. Nvidia’s persistence in coming up with new chips to sell to China despite escalating tensions between Washington and Beijing underscores how important China remains for the Santa Clara, California–based chip giant.
The act of preemptive sanctioning is, in reality, akin to a declaration of war—and targets routinely respond by shifting to a war footing. Following U.S. sanctions, China declared “unprecedented and nearly unlimited financial support for the domestic semiconductor industry” and has followed through on that commitment with massive government intervention. That assistance isn’t limited to financial aid—the full power of the state has been thrown behind its national champions. Think Huawei has any trouble getting permits, recruiting the country’s top talent, or winning customer mindshare for development trials? We don’t either.
Having grasped the full extent of Western intentions, Chinese leaders are now urgently creating an entirely domestic EUV lithography industry—a direct move to breach ASML’s formidable moat. Industry observers in the West are falling into the familiar trap of underestimating China’s capacity to rapidly replicate and ultimately surpass state-of-the-art technologies. We read this January article in the South China Morning Post with a reluctant grimace:
New approaches in the development of extreme ultraviolet (EUV) lithography are being pioneered by Chinese scientists, paving the way for the mass production of advanced semiconductor chips as researchers race to sidestep the strict sanctions put in place by the United States. . . .
The research team took a completely different technological approach from Western methods to generate EUV laser light. According to the institute’s website, the “discharge plasma extreme ultraviolet lithography light source” project, led by Professor Zhao Yongpeng from the school of aerospace engineering, “boasts high energy conversion efficiency, low cost, compact size, and relatively low technical difficulty.”
When the dust settles on this latest economic conflict, China will likely emerge with its AI ambitions intact and far less reliance on companies like ASML, Nvidia, or even Taiwan Semiconductor Manufacturing Company. Had the West focused on extending the lead of its national champions instead of embracing sanctions, the Chinese would have remained far behind and vulnerable, still dependent on foreign supply chains for advanced technologies. Would they have quietly worked to reduce those dependencies over time? Of course. But would they have done so with the urgency unleashed by the sanctions war? Almost certainly not.
We close by noting that sanctions steadily undermine the U.S. dollar’s role as the world’s reserve currency. One can think of the greenback as the EUV machine of global finance—protected by a deep, complex moat built over decades of financial architecture. The temptation to wield that dominance for raw political ends has proven irresistible, particularly as the West’s traditional pillars of power—a strong manufacturing base and prudent fiscal management—continue to erode. With each new round of sanctions, the global urgency to diversify away from the dollar intensifies.
One day soon, the world will wake up to the news that ASML’s monopoly no longer stands. Not long after, neither may America’s.
Read more Doomberg here:
This position comes off very defeatist without a stronger counter of what should be done then. If the pre-sanctions status quo brought us to the point where sanctions were ultimately introduced, then it begs the question what would the current state of affairs be if no sanctions were ever applied? I agree with others that the enforcement mechanisms as well as mustering the political will to deploy effective sanctions are key to changing behavior.
It’s a pity to see so many arrogant armchair quarterbacks glibly dismissing Doomberg’s thesis. DB may sometimes be wrong, but I’d take their batting average over nearly all others.