Inside the New Geopolitics of Chips
The new currency of sovereignty and security
In January 2025, in the final weeks of the Biden administration, new chip rules were imposed, known as “AI diffusion” rules, which divided the world into three tiers—each of which had a different kind of access to US AI chips. Countries in Tier 1, close US allies, had unfettered access, those in Tier 2, more than 150 countries, had limits, and countries in Tier 3, the main US adversaries like China or Russia, were completely blocked.
At that time, it was the most disruptive chip-geopolitics move ever.
The US was redefining its tech trade with the world, making geopolitics the determining factor for who could access its most advanced technology. It had far-reaching consequences, including in Europe, where 10 nations were in Tier 1 while 17 nations were in Tier 2, splitting the continent along new chip lines.
Within months, the new Trump administration rescinded the AI diffusion rules. Tariffs became the new status quo and threats, like imposing 100% tariffs on imported chips, fueled new headaches. Very quickly, however, the situation has evolved into something else.
Chip-geopolitics, once mainly about export controls, is expanding into a far bigger battlefield that will redefine relationships, trade models, and the flow of technology around the world.
👁 GEOPOLITICAL FORESIGHT ON CHIPS & AI
Chip-geopolitics, once a slow-moving train, is starting to accelerate—changing how geopolitics, tech, the future, and business all interact.
Mr. Geopolitics presented geopolitical foresight around a lot of this:
A Hidden Front in the US-China Tech Rivalry
The “China Tax” Is Here — And It’s Bigger Than Chips
America vs. Taiwan? Chip Tariffs Redraw the Global Tech Map
The Rise of “Geopolitical Tracking”
Except what has taken place in the past few weeks, moves the train into a new gear.
A new phase of chips and geopolitics is underway that makes what has taken place so far look like child’s play. As the geopolitical climate worsens, nations are taking the most bold, disruptive steps to safeguard their economic security and limit their adversaries.
Chip Weaponization
What took place recently between Taiwan and South Africa is the tip of the spear.
Since 2023, South Africa has been asking the Taiwanese government to relocate its main office from Pretoria, the country’s capital. At the same time, South Africa took unilateral action and renamed the Taiwanese office from “Taipei Liaison Office” to the “Taipei Commercial Office.” All of this was viewed as South Africa cozying up to China.
It angered Taiwan to the point where last week, Taipei announced it would be halting chip exports to South Africa. Companies would require pre-approval to export most Taiwanese chips to the African nation. Eventually, Taiwan paused the new chip rules after South Africa agreed to fresh discussions around Taiwan’s office in the country.
However, regardless of the U-turn, what Taiwan did pushes chip-geopolitics into new terrain.
When China restricted rare earth exports earlier this year, it made the global economy stand still (China processes 90% of the critical minerals). Concerns that China “might weaponize” rare earths—long-standing in many capitals—had suddenly come true. Strangely, Taiwan, seeking to differentiate itself from China, is now in the same boat as its chief adversary. The world has just witnessed Taiwan weaponizing the flow of chips to the world to achieve a geopolitical objective (i.e., pressure nations to distance themselves from Beijing).
In the blink of an eye, a new era of chip weaponization has begun.
This means multiple things at once:
The world’s “chip security,” already in short supply as the threat of a Chinese invasion of Taiwan grows, Western chip supply chains are being built up, and chip reserves are still not garnering proper state attention, is now even more shakier. Countries have a new headache when it comes to their access to chips: Taiwan could block trade if that nation is viewed as “pro-China.” But what exactly is considered pro-China? Considering over 140 nations are part of China’s Belt and Road Initiative, the Hang Seng index (the HKSE’s main market index) is up 30% this year, and from South America to sub-Saharan Africa, economies are seeking new Chinese capital, entire regions may fit Taiwan’s definition. This opens the door to Taiwan hitting others in the near future if they take actions that cross Taiwan’s geopolitical lines—either on the world stage or disenfranchising Taiwan itself.
A new chip precedent has also formed, which other chip powers could use if tensions flare. Could South Korea threaten to halt chip exports to the US? Or Japan to China? As geopolitical fires rage, economies with the chips could raise the bridge as punishment for what another nation is doing/proposing. The world could soon witness new “chip battlefields” as governments spar over access to one of the most critical resources. And, it could be the withholding of chips that ends up raising tensions or pausing the aggression, reflecting how significant technology is becoming to geopolitics.
For many, external chip reliance is becoming anathema. While Taiwan might have flexed its muscles, it has also put a big question mark above its head. Can the world depend on Taiwanese chip exports? If others lose confidence in Taiwanese chip flows, they will seek sovereign capabilities. This goes beyond what the West is doing. The Global South could be convinced that it needs to build regional chip production, centered in aligned and friendly nations, to thwart Taiwan or anybody else holding back semiconductors. A new push could materialize to reduce reliance on Taiwan, as Taipei plays chip-geopolitics in unexpected ways.
Surrounding all this are two equally significant consequences for the future.
To start with, the next flashpoints could emerge over chips. While Taiwan and South Africa are discussing their differences, the situation could have taken a different turn. The African Union (AU) could have gotten involved, threatening to restrict Taiwanese imports into the continent unless Taipei restarts chip exports. This would put pressure on the US and Japan to come to Taiwan’s aid. Suddenly, access to chips could ignite a much bigger geopolitical showdown.
But, perhaps more importantly, is that resource weaponization, including with chips, is in full throttle. From China to Taiwan to Qatar (e.g., Doha threatened to cut LNG exports to Europe over green rules), governments are playing their most damaging cards, ready to cut the lifeblood to other states unless their demands are met. This further erodes “old globalization” and makes “vertical globalization” (a world full of walls and barriers) the new status quo.
Help Me Help Myself
While Taiwan swings in Africa, the US is tripling down on ideas of US-made chips.
Of course, there are the two well-known, stunning moves the US government has already made: taking a 10% stake in Intel (making the White House the largest shareholder of the US chip firm), and charging Nvidia and AMD a 15% tax on their China sales to keep on accessing the Chinese market—what I am referring to as a “China Tax.”
These fundamentally change the US economic model and bring the state directly into the affairs of the nation. Once again, strangeness returns, as the US makes choices that mimic China. At the center of these moves is America prodding its technology firms from all sides to build chips locally. Whether or not this is actually possible seems to be irrelevant or a question of appetite, similar to the US telling India to stop buying Russian energy, which is impossible, considering India imports 40% of its daily oil needs (around 2 million barrels) from Moscow.
But now, the US is introducing even more complex chip rules, causing semiconductors and geopolitics to fuse in new ways.
First, the US government is threatening tariffs on foreign technology imports based on the number of chips they have. This means, everything from lawnmowers to expensive microwaves to specific electronic hardware could be taxed. This redefines the entire idea of “chip tariffs.” The previous definition was about taxing chips that were imported into America as part of a broader supply chain. The new definition, however, is about taxing products that house chips. The way out? Use American chips.
This means that technically, foreign chips may face two tariffs—a tariff on the actual chips, and now tariffs facing products that house the chips.
For chip exporters, like Taiwan, Japan, South Korea, China, or Europe, this is an explosive move. Depending on the tariff rate, exports could become far more expensive. And the solutions—to literally relocate manufacturing to America or reduce chips in the product (and therefore reduce what it can do)—are shocking. This puts the new chip tariffs at the center of US relations with key economies. Will Europe threaten more action against American tech firms unless America withdraws its chip tariffs? Will China perceive this as another push to rip legacy supply chains from its economy?
The new US chip tariffs, if passed, could have a jarring and disruptive effect on geopolitics.
Second, the US government is flirting with the idea of new 1:1 ratio rules, which would force chip firms to match foreign chip imports with local chip production—or face a tariff. If Nvidia imports 100,000 chips annually, the new rules would pressure it to also build 100,000 chips locally every year. Except, how does Nvidia do this, as it is a fabless company? The new 1:1 ratio rules force the entire chip world to integrate on a new axis—where firms like Nvidia enter into new initiatives with manufacturers like TSMC or Samsung to support America First, which seeks to compete with China in new ways. The pressure is now on chip companies to establish new setups that have tariffs and geopolitics at their center.
This is exactly what I refer to as a “geopolitical web.”
Technically, the 1:1 ratio rules are a third chip tariff. Equally challenging is that 1:1 ratio rules have no real escape or wiggle room. Either firms build chips locally or face potentially excruciating tariffs (i.e., 100%). This puts businesses in the crosshairs and has a domino effect as corporations have to redesign foreign investment, steering capital away from other economies and directing it to the US. This is an FDI loss for many governments that has so far been ignored by the world and individual states. But eventually, as local economic heat rises and job demands grow, countries will no longer be comfortable with trillions of dollars going to the US while their markets lose out. The 1:1 ratio rules might be one of the final straws that force other governments to introduce equally disruptive technology rules to stop capital from leaving. This means chip geopolitics is no longer just a sub-sect of geopolitics. It is becoming a catalyst for the future of how nations interact and economies function.
Conclusion
The world of chips and geopolitics is intersecting in ways and at once unthinkable speeds. Technology was supposed to bring nations closer together and reduce barriers, yet in the current vertical environment, the exact opposite is occurring. And, the dance between geopolitics and technology is beginning to reshape the broader global stage.
In tandem with all this, a major shift is occurring that will define what happens next. Since the beginning of 2025, the spotlight has been on what America will do regarding chips (and everything else). But today, the world has acclimated. Tariffs are no longer curveballs; they are the status quo. And, as in the case of Taiwan, other nations are swinging in bold ways. This moves the spotlight from America to the rest of the world.
The next phase of chip-geopolitics will be about how others respond to the new chip landscape, where tariffs, controls, ideology, and grand competition dominate. The stage is set for other economies to introduce policies and ideas that respond to what the US, Taiwan, and others have done.
And what these governments do is likely to further break any notion of a global chip world, introducing fault lines and borders as to how far chips can go and who is deemed safe.
-ABISHUR PRAKASH AKA. MR. GEOPOLITICS
Mr. Geopolitics is the property of Abishur Prakash/The Geopolitical Business, Inc., and is protected under Canadian Copyright Law. This includes, but is not limited to: ideas, perspectives, expressions, concepts, etc. Any use of the insights, including sharing or interpretation, partly or wholly, requires explicit written permission.
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