March Newsletter
Heavy geopolitics takes centre stage, but the tech world never stops.
We’ve got some big news to unpack this month, and I — Riccardo — will guide you through it.
The semiconductor industry is bracing for another shock - this time from China’s aggressive expansion into the market for legacy chips. These chips comprise those 28 nanometers or larger and are used in traditional consumer electronics. Their strategic relevance, however, lies also in their wide applications in military weapon systems. When the whole world realised the importance of the chips supply chain in the wake of the COVID-19 pandemic, what really went missing were legacy chips - a fact that highlighted how crucial they are for all economies to keep running.
Today, the rapid increase in Chinese production is driving prices down to previously unthinkable levels. If this trend continues, it could shift how technological competition unfolds in the future, placing China at the heart of the legacy chips segment and giving it further economic leverage for economic relations. By carving out dominance in certain segments of the chip market, China is securing a solid position in this and related value chains, challenging established leaders. Yet, whether it will be able to move up the value chain with more sophisticated chips remains uncertain.
Source: Semiconductor Industry Association
In a separate but related development, Singapore authorities have charged three men with fraud in a case involving the illegal re-export of Nvidia GPUs – the high-performance devices used for intensive computing operations - to the Chinese AI firm DeepSeek. The investigation, which included raids on 22 locations and led to multiple arrests, highlights the complexities of enforcing US trade restrictions. This case gained attention after it was revealed that Singapore suddenly became Nvidia’s second-largest geographical revenue source in 2024, fuelling suspicions that the location was being used to redirect GPUs to China despite the export controls. Nvidia has denied any wrongdoing, but this event adds another piece to the puzzle of the technological supremacy race. If you want to know more about the world of chip smuggling, the Washington-based think-tank CSIS has an insightful report on it and the effectiveness of trade restrictions.
As Washington continues its efforts to curb China’s technological rise, the Trump administration is considering even tougher limits on chip exports. US officials have been in discussions with their Japanese and Dutch counterparts, aiming to prevent engineers from Tokyo Electron Ltd. and ASML Holding NV from servicing semiconductor equipment in China. There is also talk of imposing new sanctions on specific Chinese firms and placing tighter controls on Nvidia’s AI chip exports. Discussions are underway about limiting the overall quantity of AI chips that can be exported globally without a license while nations scramble to secure AI hardware supply chains. A recent report by Gregory C. Allen tackles these aspects by focusing on the case of DeepSeek, its scientific achievements and geopolitical impact, and its implications for the future of American export control policy.
When it comes to AI and cybersecurity, OpenAI has uncovered evidence of a Chinese security operation developing an AI-powered surveillance tool designed to monitor anti-Chinese sentiment on Western social media platforms. Named “Peer Review,” the operation was detected after OpenAI researchers noticed that someone involved in its development had used OpenAI’s own technology to debug sections of its code. This marks the first time OpenAI has publicly identified an AI-powered surveillance initiative, raising new concerns about the intersection of AI, political influence, and digital authoritarianism.
If you are interested in how states use forms of hybrid interference as part of a wedge strategy, consider reading this article by Mikael Wigell from the Finnish Institute of International Affairs. It is not particularly recent, but it points to some of the structural vulnerabilities of Western democracies, especially against clandestine diplomacy, disinformation, and geoeconomic maneuvers.
If you are interested in how powers can hurt themselves, instead, give a read to “This Is How Trump Will Smash the Machine of U.S. Economic Power” in the New York Times. Henry Farrell and Abraham Newman, authors of the “Underground Empire”, extend their theory of weaponised interdependence to explain the downturns of Trump’s weaponisation of financial power and the pain it can create not only abroad but also in American households.
Relatedly, “Weaponized Interdependence in a Bipolar World” by Vili Lehdonvirta, Boxi Wu, and Zoe Hawkins is a must-read which explores how economic and security concerns shape the global reach of US and Chinese cloud data centres, highlighting the strategic vulnerabilities created by digital dependencies. The CODE project is currently diving deep into these topics, testing the limits of the weaponised interdependence hypothesis and how countries can work around economic chokepoints by shaping self-reliant production networks. We’ll bring something more elaborate about this in the coming weeks.
For those interested in the theoretical dimensions of technological competition, “Anarchy as Architect: Competitive Pressure, Technology, and the Internal Structure of States” by Morgan MacIness, Ben Garfinkel, and Allan Dafoe argues through a macrohistorical analysis of key technologies that technological change influences the competitiveness of different state forms, sometimes improving welfare but also forcing shifts that may harm citizens. Interacting with the pressures of international anarchy, some technological changes can increase the competitiveness of inegalitarian state forms.
Scientific breakthroughs have indeed some unsettling force. Relatedly, Microsoft has recently unveiled Majorana 1 – the world’s first quantum processor powered by topological qubits. These qubits are not encoded in the physical properties of a material’s individual atoms or particles like traditional qubits, but in its topology, that is, the material’s texture or the particles that braid around each other (called anyons). This development has generated admiration on the one side but partial skepticism on the other. On 19 February, in Nature, Microsoft published intermediate results – not comprehensive proof of the existence of topological qubits - triggering skepticism about the results’ validity. Scientific breakthrough or strategic signaling?
This development came at a moment when I was delving into Jeffrey Ding’s Technology and the Rise of Great Powers. Technology has always shaped economics and geopolitics, but now we’re in a period where geopolitical turmoil and technological change occur simultaneously. Books like Ding’s encourage reflections about what will end up defining what, if new features of the international system will be enabled or hindered by revolutionary innovations, or if the current phase of geopolitical chaos will motivate the search for groundbreaking discoveries.
Mark Z. Taylor has a thought-provoking book on the latter question. His argument challenges the well-established school of thought of Varieties of Capitalism, contending that domestic institutions do not determine innovation and economic governance; rather, it is the balance between domestic tensions and external security threats that determines innovative activities or stagnation. When the balance tilts towards the latter, higher innovation rates are observed. While there would be much to say about it, I’d look forward to having it on my night table to explore some “unorthodox” views on the causes of innovation.
Finally, make sure to add Edward Fishman’s “Chokepoints: American Power in the Age of Economic Warfare” to your reading list. This is all you need if you want a history of the tools of US economic warfare.
That’s it for the third edition of the CODE newsletter. More from us soon.