Can we expect more competition?

This looks likely. The semiconductor market is hugely valuable and, in a free market where there’s money to be made, it seems unlikely that the current dominance of the industry by a small number of companies will continue unchecked in the long run. Indeed, Nvidia’s own boss recently warned that China’s hugely innovative chip sector is only “nanoseconds behind” that of the USA, with Chinese technology giants such as Alibaba and Huawei investing heavily in AI chips they hope can soon rival those of Nvidia. Improved competition in the semiconductor market (and the resulting diversification of chip supply chains) is also likely to be seen as desirable in a world of increasing uncertainty and geopolitical tensions.

It's not just chip design

The provision of finished AI chips like those of Nvidia is only one aspect of the semiconductor industry currently dominated by a very small number of companies. For example, Arm’s microprocessor architecture is used in a hugely diverse range of chips and is unrivalled when it comes to chips for portable devices like smartphones. Intel, on the other hand, currently leads the market when it comes to CPUs for PCs and servers (despite rivals AMD and Arm making significant inroads into the market in recent years). There are also a number of companies dominant in making specialised types of chips for certain applications. For example, Sony leads the field when it comes to image sensing chips. These companies are clearly hugely innovative and perform an essential, if not irreplaceable, role in the chip world. However, it would be naïve to assume they are immune to increased competition in the long term.

Perhaps the most interesting example is the fabrication of chips themselves. The mind-blowing complexity and miniaturisation of chips in the last few decades mean only a very small number of chip “foundries” exist which can actually make the world’s most advanced chips. While both Intel and Samsung can boast world-class chip-making facilities, the undoubted leader here is TSMC, which is thought to make 90% of the world’s most advanced chips (including Nvidia’s AI chips). In fact, TSMC is thought to be the only company with the ability to make some of these chips.

This reliance on a single party for chip production even extends to makers of the chip-making equipment. For example, currently, only Netherlands-based ASML is able to supply the EUV lithography machines required for making the world’s most advanced chips.

Many believe the reliance of the world’s chip supply on such a small number of players is undesirable and unsustainable. Increased diversification and competition in the chip supply chain is thus expected in the long run. Indeed, this is already happening, both among existing players in the industry who are embracing new business models (such as Intel who, like TSMC, now offer their foundry services to external customers) and through new entities (such as Japan’s Rapidus) who, with government and industry backing, are looking to find their niche and become future leaders in the chip market.

Will the patent system become more relevant?

With increased competition, the patent system may become an increasingly attractive way to protect innovation. A single company completely dominant in one aspect of the semiconductor industry may choose to rely on extremely high barriers to entry and internal knowhow to maintain its market position. However, with increased competition, especially from innovative and agile newcomers with hefty government backing, this can be a riskier strategy. In this case, using the patent system may well be a better option.

As well as being enforceable against competitors to obtain, say, injunctions or damages for using patented technology without permission, patents can also perform a defensive function against competitors who might otherwise be tempted to aggressively assert their own patents. They may also open new revenue streams through licensing agreements or partnerships through cross licensing. This might be particularly beneficial in more competitive markets, where more complex and diversified supply chains might make it much more difficult to control the distribution of previously secret knowhow.

Semiconductor patents at the EPO

The patent granting system, including that of the European Patent Office (EPO), is well established for semiconductor-related inventions. For instance, the EPO may allow independent claims directed both to a semiconductor product (for example, a chip) and a corresponding method of manufacture of that product if both the product and method are new and inventive. Following the EPO’s Enlarged Board Decision G 1/19, the EPO may also be able to grant patents for new and inventive simulations related to semiconductor manufacture or design (as long as a suitable “technical effect” of the simulation can be demonstrated).

The EPO is also usually appreciative of the need for independent claims to be worded to capture specific competitor activities in the product supply chain (such as through the use of claims covering chiplets rather than full system-on-chips (SoCs) - see our recent article on this) and will often be receptive to such claims as long as they are clear and define new and inventive subject matter.

It is also worth remembering the power of a European patent. The 38 member states which can be covered by a European patent include four of the world’s top ten economies (the UK, Germany, France and Italy) and around half the world’s top 25 economies. These are large markets for chips and the devices which contain them. At the time of writing, 18 of these member states (including Germany, France and Italy) can also be covered by a single patent right in the form of the unitary patent once the European patent is granted. This is enforceable centrally in all 18 of these member states through the Unified Patent Court (UPC).

Conclusion

The semiconductor industry is incredibly valuable and complex and will only become increasingly important in the coming years. Although currently dominated by a small number of firms, this is unlikely to be sustainable and increased competition in the market is therefore expected in the long term. Patents can be an extremely useful tool for innovative companies, whether dominant incumbents or agile new entrants with powerful backing, in maintaining an edge over the competition.

For a discussion about your patent strategy, please contact the author or your usual D Young & Co representative.

Useful link

BBC news, 06 October 2025: How China is challenging Nvidia's AI chip dominance.