The Bundling Effect: Why Hedging Between US and China Is Dying

During hyper-globalization, you could pick and choose: military alignment with the US, economic integration with China, financial ties with Europe, tech partnerships wherever optimal. Now it’s bundled. If you pick one domain, you increasingly get locked into that bloc across all domains.

The ASML Case

The ASML case illustrates this perfectly: if you want to remain in the US tech ecosphere and under the US defense umbrella, you comply with technology export restrictions to China. You can’t have US security guarantees while selling cutting-edge lithography equipment to Chinese chip — as explored in the economics of AI compute infrastructure — makers.

The unbundling that enabled hyper-globalization is reversing. Hedging is dying. Bundling is back.

What This Means Practically

During the unbundled era, a European company could:

– Rely on US military protection
– Source manufacturing from China
– Access capital from London and New York
– Partner with whoever offered the best technology

In the bundled era, these choices become linked. Tech alignment follows security alignment. Financial access follows political alignment. Manufacturing location signals bloc membership.

The Corporate Dilemma

Companies that built strategies around arbitraging between blocs face a reckoning. The arbitrage opportunities are closing as alignment in one domain forces alignment in others.

The strategic question isn’t “how do we optimize across both blocs?” It’s increasingly “which bloc are we in, and how do we maximize within that constraint?”

Key Takeaway

As the Economics of Lithography shows, technology chokepoints are where bundling becomes visible. ASML can’t be neutral because its technology is too strategic.

Source: The Great Fracturing with Neil Shearing on The Business Engineer