Silicon Curtain: Is the US Rebooting the Cold War?

What Is the US Doing?

In an effort to curb China’s technological and military ambitions, the US has introduced stringent export controls on AI chips. The policy categorises countries into three tiers:

• Tier 1: Close allies like the UK, Japan, and South Korea enjoy unrestricted access to US-designed chips.
• Tier 2: Over 100 countries face strict quotas, requiring agreements to ensure secure usage.
• Tier 3: Nations like China, Russia, and Iran are essentially cut off from accessing advanced AI chip technology.

This move is part of a broader strategy that began with the CHIPS Act, a $280 billion initiative to boost domestic semiconductor production and research. But make no mistake, this is not merely economic policy—it’s a chess move in a larger geopolitical game.

Echoes of the Past: Cold War 2.0?

The parallels with the original Cold War are striking. In the 20th century, the US and the Soviet Union competed for dominance in nuclear weapons, space exploration, and ideological influence. Today, the battleground has shifted to technology. AI chips are not just tools for consumer products; they are critical for military applications, surveillance systems, and economic powerhouses like autonomous industries.

Like the Cold War, this policy is designed to weaken an adversary’s strategic capabilities. By restricting access to high-performance chips, the US aims to delay China’s progress in AI—a field it views as the linchpin of future global dominance.

Economic Countermeasures

Accelerating Domestic Semiconductor Production

China:China has heavily invested in its semiconductor sector, funnelling billions into state-backed firms like SMIC (Semiconductor Manufacturing International Corporation). These companies aim to achieve self-sufficiency in chip production.

While China remains behind in cutting-edge technology (e.g., 7nm and below), it can focus on producing less-advanced chips sufficient for many AI applications.

Localisation efforts are supported by subsidies, talent acquisition, and R&D in alternative chip manufacturing technologies such as carbon-based transistors or advanced lithography tools.

Russia: Russia, heavily sanctioned and technologically isolated, is working to develop basic semiconductor capabilities domestically. While it lacks China’s scale, it is pursuing partnerships with nations like Belarus and China for technological assistance.

2. Strengthening Alliances with Friendly Nations

China and Russia: Beijing and Moscow are deepening ties in technology-sharing agreements, particularly in areas like AI and supercomputing. This includes joint R&D projects and bilateral trade in semiconductor materials and tools.

Both nations are also engaging in alternative payment systems to bypass US-dollar-dominated markets, reducing reliance on the US financial system.

Global South: Tier 3 countries are cultivating closer ties with developing nations in Africa, South America, and Southeast Asia by offering cheaper technologies and infrastructure deals, including AI-driven tools for agriculture, surveillance, and fintech.

3. Exploiting Grey Markets and Smuggling

Parallel Supply Chains: Countries like China and Iran may rely on grey markets to procure restricted components. They can source older-generation chips through intermediaries in Tier 2 countries or use shell companies to bypass restrictions.

Smuggling operations, leveraging global free trade zones, will likely increase in scale and sophistication.

4. Retaliatory Economic Measures

Rare Earths Export Controls: China dominates the global supply of rare earth minerals, critical for manufacturing semiconductors, electric vehicles, and military equipment. Beijing could impose export restrictions, disrupting supply chains for US and allied industries.

Diversifying Export Markets: China and Russia may pivot to trading with countries not aligned with the US, creating alternative economic blocs. These include BRICS nations (Brazil, Russia, India, China, South Africa) and others seeking independence from US influence.

What Makes This Cold War Different?

This “new Cold War” has some key differences:

Interdependence: Unlike the US-Soviet rivalry, the US and China are deeply economically intertwined. Cutting off technology flows risks collateral damage to global supply chains.

Multipolar World: While the Cold War had two clear poles, today’s geopolitical landscape includes influential players like the EU, India, and South Korea, each with their own agendas.

Economic Warfare: Instead of direct military confrontation, this rivalry is waged through sanctions, trade policies, and technological decoupling.

The Risks Ahead

The stakes in this new Cold War are enormous. AI and semiconductors are not just about economic growth—they are the foundations of future military and intelligence capabilities. A race to outpace rivals could lead to an AI arms race, with unpredictable consequences.

Moreover, the global semiconductor industry relies on collaboration. Taiwan’s TSMC, for example, manufactures chips for both US and Chinese companies. Further disruption could destabilise this fragile ecosystem, leaving everyone worse off.

Conclusion: Cold War 2.0 or Something Else?

So, has the US started a new Cold War? In many ways, yes. The tiered AI chip export policy is a clear attempt to limit China’s rise while reinforcing US alliances. However, this conflict is not a carbon copy of the Cold War. It’s more complex, with higher economic stakes and a more interconnected world.

What’s certain is that we’re entering a new era of geopolitics where technology, not territory, defines power. As this battle unfolds, the question isn’t just who will lead in AI, but at what cost. The future of innovation, collaboration, and global stability hangs in the balance.