Four choke points
Follow a chip backwards. The finished processor came from a fab, and for the most advanced chips that fab is almost certainly TSMC in Taiwan, with Samsung in South Korea a distant second. The fab used lithography machines, and the only company on earth that makes the most advanced ones is ASML in the Netherlands, at something like a few hundred million dollars each. The machine's design and the chip's design were done with software from three companies, all American. And the chip was designed by a company like Nvidia or Apple, also American.
Each of those is a choke point: a place where one country or one company can say no. Export controls work by saying no at the choke points you control. The US controls the design software and the chip designers. It has persuaded the Netherlands and Japan to control the machines. Taiwan controls the fabs, and everyone is nervous about that.
What the controls actually do
Since 2022 the US has restricted sales of the most advanced AI chips and chipmaking tools to China. The rules have been tightened, loosened, and re-tightened several times since, and companies like Nvidia have designed special slower chips to sell into China within the limits.
Did it work? Partly. Chinese labs have kept building capable AI models, sometimes on older hardware and sometimes on chips that found their way in anyway. Chinese chipmakers have made progress, but by most accounts they are still years behind on the most advanced nodes and cannot buy the machines to close the gap. The controls did not stop Chinese AI. They made it more expensive and slower, which is what controls usually do.
Where Canada fits
Honestly, not at the front. Canada does not have a leading-edge fab and is not going to get one. What Canada has is upstream and downstream. Upstream: raw materials, including some of the critical minerals that go into the supply chain, and a lot of hydro power that data centres want. Downstream: research (the University of Toronto and Montreal were early homes of deep learning), a few specialised chip design firms, and a growing number of data centres in Quebec and Ontario.
The Canadian bet, to the extent there is one, is on being the place where the chips get used rather than made. Cheap, clean electricity and cold weather are real advantages for a building full of GPUs. Whether that turns into jobs beyond construction and security is a fair question.
What I would watch
Three things. First, TSMC's Arizona fabs. If they reach the same yields as Taiwan, the geography of the industry changes and the Taiwan risk shrinks. Early reports say they are getting close. Second, whether the export control list keeps expanding to cover the chips that data centres in third countries can buy, because that would affect Canada directly. Third, the electricity numbers. Ontario is already short on power for the next decade's demand. If data centres take the surplus, the argument about who gets the electrons becomes a political fight, and it will be a loud one.