As policymakers work to strengthen U.S. national security and prevent the misuse of advanced technologies, Congress is rightly focused on safeguarding the semiconductor supply chain and protecting sensitive AI capabilities from falling into the wrong hands. These objectives are widely shared across the technology sector. Preventing illicit access to advanced compute and strengthening export controls are essential to maintaining America’s technological advantage.
However, effective security policy must also account for how modern digital infrastructure operates across borders. As currently drafted, the Chip Security Act raises serious concerns not only about technical feasibility and competitiveness, but also about unintended consequences for global data governance and data sovereignty.
At a moment when the United States is working to promote trusted digital ecosystems and open technology partnerships with allies, policies that introduce uncertainty around control, monitoring, or jurisdiction over computing infrastructure risk accelerating global data fragmentation.
Data Sovereignty Risks and Global Trust
Many countries maintain strict legal frameworks governing where data may be stored, processed, and accessed. Requirements that enable remote verification or monitoring of chips and AI infrastructure deployed overseas could be interpreted by foreign governments as granting the U.S. ongoing technical visibility into systems operating inside their borders. Even if no user data is accessed, the mere perception that a foreign government has visibility into domestic infrastructure of a partner nation could trigger regulatory backlash.
This creates a real risk that partner nations respond by imposing localization mandates, restricting deployment of U.S. technologies, or requiring locally controlled alternatives to American hardware and cloud infrastructure. Rather than strengthening security, such outcomes could fragment global technology markets and weaken trusted cross-border data flows that underpin AI innovation.
This dynamic also creates openings for strategic competitors. Chinese technology firms often position themselves as providers that operate without comparable jurisdictional visibility requirements. Even where security concerns about Chinese technology remain high, uncertainty surrounding U.S. mandates can complicate allied decision-making and hand competitors an advantage. Over time, that shift can erode U.S. market share and weaken American influence over global AI ecosystems.
American leadership in AI depends heavily on global adoption of U.S. technologies. Policies perceived as undermining national digital sovereignty abroad may encourage governments to pursue technological decoupling or sovereign compute strategies that exclude U.S. providers.
Untested Technology Mandates Create Operational and Security Challenges
The legislation proposes requiring location verification and tracking mechanisms for advanced chips deployed globally. These solutions remain largely untested at scale.
Modern data centers frequently operate in secure or air-gapped environments with limited connectivity by design. Continuous geolocation verification assumes persistent network access that often does not exist in high security or sensitive commercial deployments. Prematurely mandating security features also risks introducing vulnerabilities into critical hardware systems. Security mechanisms that have not undergone rigorous real-world testing may expand attack surfaces or degrade performance, undermining both reliability and trust in U.S. technologies.
Security policy must strengthen resilience and avoid introducing new points of failure into globally deployed infrastructure.
Enforcement and Partnerships Offer a Stronger Alternative
TechNet strongly supports efforts to prevent diversion of advanced technologies to foreign adversaries. Industry has already implemented extensive compliance safeguards and works closely with government authorities to strengthen export enforcement.
Rather than mandating unproven technological solutions, policymakers should prioritize strengthening enforcement capabilities, expanding intelligence coordination, and deepening cooperation with allied governments. Targeted enforcement tools address illicit procurement directly without introducing systemic risks to lawful global deployments. Effective export controls depend on collaboration and trust among partners. Policies that unintentionally raise sovereignty concerns may complicate the international cooperation needed for successful enforcement.
Standards Before Statutes
A more effective path forward would allow technical experts to evaluate potential chip security mechanisms through collaborative standards development processes before embedding requirements into law.
A standards-led approach enables governments, industry, and researchers to assess scalability, interoperability, and international legal implications, including data sovereignty considerations, before mandates are imposed. This ensures that any future requirements strengthen security while remaining deployable across diverse global environments.
Securing AI Leadership Without Fragmenting the Digital Economy
The debate surrounding the Chip Security Act reflects a broader strategic challenge. Policymakers must secure advanced technologies while preserving the open and trusted digital ecosystem that underpins U.S. leadership.
AI competitiveness depends not only on technological innovation, but also on global confidence in American infrastructure, cloud services, and semiconductor supply chains. Policies perceived as extending jurisdictional control over foreign-operated infrastructure risk accelerating data localization trends and fragmenting the global digital economy.
TechNet supports thoughtful and targeted measures to prevent misuse of sensitive technologies. Durable security policy must align with technical reality, reinforce international trust, and avoid unintended consequences that undermine global adoption of U.S. innovation.
America’s leadership in AI and semiconductors rests on openness, interoperability, and trusted partnerships. Protecting that leadership requires policies that enhance security while respecting data sovereignty, preserving cross border data flows, and sustaining global confidence in American technology. Getting this balance right will determine whether U.S. policy strengthens America’s global AI leadership or inadvertently drives the world toward technological fragmentation.