The global digital economy is undergoing a structural transformation. What was structured by market integration, cross-border openness, and platform dominance between 1990 and 2015 is now reorganising around sovereignty, chokepoint control, and resilience. This shift has accelerated since the late 2010s. Early signals were driven by national security rationales (e.g. the U.S.’ campaign against Huawei) or reflected through a rights-based approach to controlling cross-border data flows (e.g. the EU’s GDPR).
The shift intensified in the early 2020s with an increasing emphasis on industrial policy and export controls, including the U.S. CHIPS Act and 2022 export controls targeted at Chinese chip access. These interventions have reconfigured technological systems’ governance, with states shaping access to digital infrastructure rather than merely overseeing markets. Digital infrastructure is increasingly treated as a strategic asset, and control over compute, data, and algorithms underpins geoeconomic power.
This transformation reflects Susan Strange’s concept of structural power: the ability of states to shape the frameworks within which economic activity occurs. In the digital age, these frameworks consist of technological infrastructure-layered systems such as semiconductor supply chains, cloud computing networks, and data systems that underpin the digital economy. The concentration of capabilities within these systems creates structural asymmetries that render certain nodes strategically significant. Under the pre-transformation order, these asymmetries preceded political action; under the current landscape, they have become avenues of active contestation. States do not create them but increasingly recognise and act upon them.
Unlike cyclical regulatory adjustments, which refer to policy responses that correct market failures while preserving an open digital economy, current developments are altering the underlying logic of the global digital economy. Digital infrastructure access is increasingly conditioned by geopolitical alignment rather than commercial exchange. The result is the emergence of infrastructure geopolitics, where control over the technological infrastructure becomes a central terrain of international competition.
Technological Sovereignty and Digital Interdependence
The development of digital technologies has outpaced governance frameworks. As these technologies gain dual civilian–strategic functions, governments frame digital governance around technological sovereignty: not full self-sufficiency, largely unattainable given complex global supply chains, but the ability to secure critical infrastructure access while managing dependencies.
States are not withdrawing from global networks but restructuring dependencies within them. China, for example, remains reliant on specialised equipment from European and Japanese firms, while Europe depends on US-based cloud providers and East Asian semiconductor manufacturing. This shift reflects the prioritisation of security over efficiency: if interdependence were treated primarily as an economic good, incentives to restructure dependencies would weaken. The terms of access to infrastructure have thus shifted structurally, even where systems remain concentrated.
This shift is also reflected in international economic law. Trade and investment regimes were designed to support open markets, yet states increasingly invoke security-based justifications to restrict access to strategic technologies. Governance of digital interdependence is therefore shaped by geopolitical considerations.
Chokepoints in Technological Supply Chains
Sovereignty strategies increasingly operate through control over technological chokepoints within global supply chains. Advanced semiconductor manufacturing provides the clearest example. Leading-edge fabrication, specialised equipment, and design software are concentrated in a small number of firms and jurisdictions, creating critical nodes in digital production that states can increasingly exploit.
Export controls illustrate how states leverage these chokepoints. While such measures have historical precedents, their contemporary application is broader. They now target the trajectory of technological development, including access to advanced computing and AI infrastructure. The 2022 US measures extending restrictions to foreign firms using US-origin technology exemplify this expanding reach.
This dynamic places legal frameworks under strain. WTO rules were designed for an open global economy, yet states increasingly invoke national security exceptions, most notably Article XXI to justify restrictions on strategic technologies. The weakening of the WTO’s dispute settlement system, particularly the paralysis of the Appellate Body since 2019, has reduced enforcement. International economic law thus operates less as a binding constraint and more as a strategic resource that states reinterpret or bypass.
At the firm level, this shift is mirrored in strategies that prioritise resilience over efficiency, as companies absorb higher costs to diversify supply chains or build redundancy. Control over upstream technologies allows states to shape competitors’ capabilities, while interdependence continues to constrain both suppliers and users.
Infrastructure Concentration and Corporate Power
A defining feature of this transformation is the concentration of digital infrastructure within a small number of firms. Semiconductor production, cloud computing, and AI development are dominated by a limited set of actors, including NVIDIA, TSMC, ASML, and major US hyperscalers. These firms control critical layers of the technological infrastructure, making them central economic and geopolitical actors.
The relationship between states and firms is therefore evolving. Governments depend on privately owned infrastructure while seeking to regulate and, at times, strategically direct it. States increasingly engage with these firms as partners, regulators, and instruments of geopolitical strategy.
These dynamics point toward a structural transformation of the global digital economy characterised by managed fragmentation. The system is not collapsing into separate technological blocs but is increasingly defined by selective integration combined with strategic control over key infrastructure layers.
The US and China remain primary drivers (“makers”), while others respond based on their structural position within the global digital economy (“takers”). The EU emphasises regulatory sovereignty while remaining dependent on external infrastructure, and smaller economies like Singapore seek flexibility within global networks of power.
This transformation does not imply full technological decoupling. Interdependence persists but is increasingly conditioned by political considerations. Sovereignty-oriented policies may enhance resilience but risk constraining innovation by limiting access to global knowledge flows. At the same time, security-based trade measures challenge the stability of the rules-based international economic system.
The transformation also creates opportunities for firms positioned within critical infrastructures, who can gain influence while states capable of shaping infrastructure access can exercise disproportionate power. The emergence of infrastructure geopolitics thus represents a redefinition of how economic power is organised and exercised in the digital age.
