BANGKOK — In a significant response to the increasing tensions with the United States, China has imposed bans on the export of essential materials critical to the manufacture of a variety of products including smartphones, electric vehicles, radar systems, and CT scanners. This move comes as a retaliation following Washington’s expansion of export controls to encompass numerous Chinese companies involved in producing advanced computer chips.
Both nations justify their trade restrictions by citing national security considerations, each accusing the other of “weaponizing” trade relationships. Analysts predict that these latest limitations could adversely affect manufacturing across numerous sectors and disrupt supply chains considerably. As noted in a report from the Center for Strategic International Studies, “Critical mineral security is now intrinsically linked to the escalating tech trade war.”
The ultimate effect of China’s export restrictions will, in part, hinge on the ability of U.S. industries to adjust their operations adequately in the face of losing access to these strategically significant materials, equipment, and components. Observers suggest that this situation could mark a pivotal moment in the escalating trade conflict between the two leading economies, especially as tensions were anticipated to intensify with the inauguration of President-elect Donald Trump, who has indicated plans to raise tariffs on Chinese imports.
China’s recent actions include a ban on the export of gallium, germanium, and antimony — minerals that are vital for fabricating advanced semiconductors among other technologies. Beijing has also heightened control over exports of graphite, which is crucial for batteries in electric vehicles and energy grid storage solutions. China is dominant in the production and refining of most of these materials, which serve both consumer and military needs.
Additionally, the restrictions imposed include export controls on super-hard materials like diamonds and certain synthetic substrates known for their density and non-compressible characteristics, which are utilized in a range of industrial applications from cutting tools to protective coatings. Experts are also anticipating potential future bans on materials such as tungsten, magnesium, and aluminum alloys.
On the flip side, the American government has implemented new export measures designed to restrict the sale of specific advanced semiconductors, alongside the equipment and software necessary for their production. The expansion of the U.S. “entity list” has now included around 140 additional companies, primarily from China.
Gina Raimondo, U.S. Secretary of Commerce, stated that the modifications to export rules aim to undermine China’s capacity to utilize advanced technologies that could threaten U.S. national security. These adjustments also restrict exports of high-bandwidth memory chips essential for handling substantial data volumes in advanced applications, including artificial intelligence. Export licenses for businesses engaging with the newly added companies on the entity list are expected to be denied, reinforcing the U.S. objective of preventing Chinese firms from appropriating U.S. technologies for their semiconductor production.
The Biden administration has been intensifying efforts to extend the scope of companies under export control while advocating for increased investments in semiconductor manufacturing within the U.S. and allied nations. Moreover, restrictions on advanced semiconductor technology exports have been broadened to include companies from other nations, although key allies such as Japan, South Korea, and the Netherlands are exempt due to their robust export control systems.
These materials are vital, particularly for producers of advanced technology in the U.S., Japan, South Korea, Taiwan, and others. They require materials like gallium and germanium, which are increasingly replacing silicon in semiconductors due to their superior properties. Notably, the U.S. Geological Survey has classified gallium and germanium among essential minerals integral to the nation’s economic and security interests, recognizing their vulnerability to supply chain disruptions.
Gallium, prominently needed for producing high-bandwidth memory chips that the U.S. aims to keep out of Chinese hands, is also used extensively in various applications including LEDs and lasers. A recent study by the USGS suggested that disruptions in supplies of gallium and germanium could cost the U.S. economy over $3 billion. Complicating matters, China had already imposed licensing requirements on these exports as of July 2023, and there have been no significant shipments to the U.S. up to this point in the year according to data.
China holds a predominant position in the production of these critical minerals, yet alternatives exist. For instance, Japan fulfills most of its gallium needs through imports, but also participates in recycling scrap materials to extract it. In response to these developments, Washington is actively working to establish new supply chains outside of China, through initiatives like the “Minerals Security Partnership” involving the EU and 15 other nations. This strategy was recently underscored by President Biden’s visit to Africa, aiming to secure additional sources of critical materials.
Furthermore, the United States has engaged in the extraction of germanium from zinc in states like Alaska and Tennessee, while the government maintains a strategic stockpile. The Department of Defense has initiated programs to recapture germanium by recycling materials derived from night vision equipment and tank components. Nevertheless, China’s supremacy as a supplier offers it a significant cost advantage, and U.S. mining and refining companies commonly face substantial scrutiny over potential environmental consequences.
Since former President Trump instigated a trade war against China, tension has increased gradually. China’s previous responses to U.S. tech limitations tended to be measured and restrained. The future trajectory of U.S.-China relations remains uncertain; it is unclear whether Trump will pursue the aggressive tariff measures he has previously indicated or if these would merely serve as initial negotiation tactics.
In contrast to prior approaches, recent statements from various Chinese industry associations, including those representing automakers and the China Semiconductor Association, criticized U.S. restrictions on access to critical technologies, asserting concerns over the reliability of American computer chips. Following the announcement of its export ban, China stated that it would expand the prohibitions on gallium and other critical mineral exports to all nations, asserting that violators would be subject to legal accountability.
