Escalating technology Warfare

China responds by banning minerals export

China is responding to the latest batch of export restrictions from the Biden administration by banning the export of rare minerals and metals to the United States. These are crucial for high-tech development, and China has large quantities of them. The response escalates the tech war just before US President Donald Trump takes office, with the multibillionaire Elon Musk on his staff.

Nearing the end of his term, President Joe Biden strengthened the CHIPS and Science Act, which he signed on August 9, 2022. The law expressly aims to restrict and delay the development of China’s technological development. China has made great progress the last two decades and is challenging US dominance.

China has caught up with and overtaken the US in several sectors, but is lagging a generation or two behind in the production of semiconductors and, not least, the development of the production equipment that produces semiconductors and microchips.

Technology Act against China

The time it takes for China to move from one generation to the next on the technological ladder is getting shorter. At the 20th Party Congress of the Communist Party of China (CPC) in October 2022, President and Party Leader Xi Jinping gave marching orders to take a global technological commanding position.

The initiative came about two months after the United States introduced the CHIPS and Science Act, which was an expanded merger of the Endless Frontier Act, which aims to stimulate increased investment in domestic high-tech research, and the CHIPS for America Act, to bring semiconductor manufacturing back to the United States.

The law is clearly and capitally directed at China and is equipped with secondary sanctions to target foreign companies that may contribute to the high-tech development in China.

This also applies to Taiwan Semiconductor Manufacturing Company (TSMC), which boasts of being the world’s most valuable semiconductor company, according to CNBC, the world’s largest independent (“pure-play”) semiconductor foundry, according to IC Insight, and the breakaway republic’s largest company.

The United States depends on exports from Taiwan, which produces more than 60 percent of the world’s most advanced microchips.

Export ban against the US

The export ban applies to gallium, germanium and antimony, all of which are essential for the production of semiconductors and advanced chips that the new American measures are meant to target.

Biden justified his restrictions with US “national security”.

“Washington will continue to work with allies and partners to proactively and aggressively secure our world-leading technologies and knowledge, so that they are not used to undermine our national security,” explained Biden’s national security adviser Jake Sullivan.

On Tuesday, China’s Ministry of Commerce used the same justification: concerns about China’s “national security” as a result of Washington’s anti-China policies.

“In order to safeguard national security interests and fulfil international obligations such as non-proliferation, China has decided to strengthen export controls on relevant dual-use items to the United States,” Beijing said in a statement.

“I reiterate that China firmly opposes the United States overly stretching the concept of national security and abusing export control measures and illegal, unilateral sanctions and far-reaching jurisdiction against Chinese companies,” Lin Jian, a spokesman for the Ministry of Foreign Affairs, said on Tuesday.

The export ban tightens the enforcement of existing restrictions on the export of rare earth minerals that Beijing introduced last year. Here too, there is no concealment of who the export ban is aimed at: It applies exclusively to the United States.

This is thus an indirect invitation to the EU, either collectively or to each member state, not to follow or be pressured by the United States’ China policy. The EU is far worse off in the most advanced technological sectors such as AI and quantum computing, consumer technology, telecommunications and the development of weapons production.

More in stock

Gallium (Ga) and germanium (Ge) are both used in semiconductors. Germanium is also used in infrared technology, fibre optic cables and solar cells. Antimony (Sb for stibium) is used in bullets, infrared missiles and other weapons, while graphite (pure carbon, C) is the leading component by volume in electric car batteries.

China, with 600 tons in 2022, accounts for no less than 94 percent of the world’s production and 98 percent of the world’s exports of gallium. Gallium was discovered in 1875 by the French chemist Paul-Émile Lecoq de Boisbaudran, hence the name. Gallium has a low melting point – it melts in the hand – which makes it suitable as a superconductor. China is also one of the world’s largest semiconductor producers.

China accounts for 83 percent of global production of germanium, which was discovered in 1886 by German chemist Clemens Winkler at the Mining Academy in Freiberg, Saxony, Germany, according to Wikipedia. The element was used in the world’s first transistor in 1947, and the semiconductor crystal replaced the old radio vacuum tubes. Today, radios with transistors probably only exist in Van Morrison’s “Brown Eyed Girl”. Germanium is now complemented with silicon, which has broader semiconductor properties.

Exports of graphite, another component in semiconductors and batteries, will be subject to “stricter end-user and end-use assessments”, the ministry announced, according to The Guardian.

The signals from Beijing are that China has more in stock and rarer minerals that could be subject to export bans – and which have even wider applications. This could apply to nickel (Ni) and cobalt (Co).

Although the announcement of the export ban came on Tuesday the 3rd of December, it seemed as if it had already been implemented. Chinese customs data show that there were no shipments of processed or unprocessed germanium or gallium to the US this year up to October, which the figures cover. This must be weighed against the fact that last year the US was the fourth and the fifth largest market for these minerals, writes The Guardian.

The decline in antimony exports is equally brutal: down 97 percent from September. Antimony has been known in cosmetics in Egypt and the Middle East since ancient times, and in a metallurgical sense, Vannoccio Biringuccio of Italy describes the procedure for isolating antimony in his book “De la pirotechnia” in 1540, again according to Wikipedia.

140 Chinese companies

The latest US package imposes restrictions on shipments of HBM (high bandwidth memory) chips, which are essential for advanced applications, including AI. It includes 24 chip manufacturing tools and three software tools and affects no less than 140 companies, both China-based and Chinese-owned businesses in Japan, South Korea and Singapore.

The list includes semiconductor manufacturer Piotech in Shenyang in north-eastern Liaoning province, semiconductor tool manufacturer Naura Technology Group in Beijing and SiCarrier, a semiconductor subcontractor that works closely with Huawei.

SiCarrier is based in Shenzhen, one of the first four export-oriented zones (SEZs) that China established under Deng Xiaoping’s “open door” policy in May 1980. The small farming and fishing village in southern Guangdong province had about 30,000 residents at the time, and could see light from the sky-scraping skyline of the British crown colony of Hong Kong.

Today, Shenzhen is China’s third-largest city, after Shanghai and Beijing, with 17.6 million residents, and has siphoned off much of Hong Kong’s industry and become a high-tech hub in its own right. The city on the banks of the Pearl River has become an iconic symbol of China’s growth and is the world’s fourth-busiest container port.

The companies on the US list will not be allowed access to cutting-edge chips that can be used in advanced weapons systems and artificial intelligence. The restrictions include controls on approximately twenty types of chip-making equipment and three types of software tools for the development or production of semiconductors, according to Reuters.

Rapid and coordinated response

Beijing’s reactions came quickly, accusing the US of “politicizing and weaponing economic, trade and technological issues.” It is a case of tit-for-tat, with Beijing copying Washington’s justifications and exporting them back.

The most frequently used argument is that the products can be used for both civilian and military purposes and for gathering information. This applies to Chinese-made Chinese cars, according to the US and the EU – an argument which Norway has not purchased.

China’s immediate response shows that Beijing will not be fooled by US pretexts.

“The measure is clearly a retaliatory attack against the US,” Dylan Loh, assistant professor at Singapore’s Nanyang Technological University, told The Guardian. He highlights the important point that “China is not completely passive” and has “some cards it can play to hit the US when it comes to chips.”

Creating ripple effects

The escalation of the tech war could lead to supply chain disruptions due to US secondary sanctions and hit third parties, warns Ja Ian Chong, associate professor of political science at the National University of Singapore.

Others downplay the danger because the dispute between the US and China has been going on for so long that “many intermediate manufacturers in the supply chain have stockpiled these materials,” reports the French AFP.

They are receiving advice from Beijing to Chinese trading partners “to find local alternatives to US chips.” China believes that the US restrictions, including the secondary sanctions, will backfire.

“The Chinese auto industry’s confidence and trust in the procurement of US chip products is being shaken, and US auto chip products are no longer reliable and safe,” the China Association of Automobile Manufacturers, the association for Chinese automakers, said on December 3.

The automakers were joined by three other major industry associations, which, in the Chinese context, indicates that the move is coordinated with the authorities, according to Reuters.

Turmoil in Silicon Valley

The call from Beijing and the Chinese industry associations could have consequences for the US chip giants Intel, AMD and Nvidia, which have so far avoided US restrictions and export controls. They still sell to China.

The latest restrictions – the third in three years – are tightening the Chinese market, and the reactions signal that Beijing is now stepping up its game in the area prioritized by President Xi Jinping and the CCP.

“China has moved quite slowly or cautiously when it comes to retaliating against U.S. moves, but it now seems quite clear that the gloves are off,” states Tom Nunlist, assistant director at the analysis firm Trivium China, to Reuters.

It is not just US manufacturers that are trying to adapt to what may come with the escalation of the tech war. Trump and the EU’s policy towards China were high on the agenda at the annual meeting of Dutch tech company ASML Holdings in Veldhoven in mid-November.

ASML, founded in 1984, is a major producer of silicon wafers and the leading maker of computer chip equipment. Analysts question whether the company can still grow in the chip market.China is ASML’s largest market, accounting for more than 40 percent of the holding company’s sales. There has been a decline during the year, but the company is calculating growth in both 2025 and 2026 based on the huge demand resulting from China’s efforts and possible new measures against the American giants.

In September 2023, the Netherlands agreed to enforce US export restrictions on advanced semiconductors. The right-wing government says it shares the US security assessments with regard to China. It will assess the recent Chinese measures even if they do not directly affect the Netherlands, with a view to introducing its own restrictions against China. The Netherlands has, next to the UK, the largest European investment portfolio in the US.

The latest US restrictions concern chip manufacturing tools manufactured in Singapore and Malaysia. Currently, US officials are in talks with Japan about introducing restrictions against China itself, close to self-imposed secondary sanctions. An official agreement has not yet been signed.

Strategic

The Chinese measures have a strategic purpose. They allow Beijing to better assess the extent to which the US military-industrial complex depends on critical minerals from China, since China dominates the global mining and processing of rare earths.

The US imports about half of its gallium and germanium supplies directly from China, according to US Geological Survey. The US does not produce gallium because it has not had any viable deposits until high-grade deposits were discovered in the state of Montana in March.

The US also relies on exports from Taiwan, which produces more than 60 percent of the world’s most advanced chips.

Last year, China imposed export restrictions on antimony, a strategic metal used in military applications such as ammunition and infrared missiles. In October 2023, graphite products for car batteries were subject to similar restrictions.

In July 2023, restrictions were imposed on the export of eight gallium and six germanium products citing “national security interests.” The first retaliatory measure from the Chinese side that was justified by “national security interests” came in May last year when the American chip manufacturer Micron failed Beijing’s security assessment, according to Reuters.

Now Intel is in the spotlight of the Cybersecurity Association of China, which claims that the American major manufacturer “has consistently harmed the country’s national security and interests.” This indicates that Intel, a major supplier to manufacturers of personal computers and servers in data centres in China, is subject to a security assessment. Last year, Intel earned a quarter of its revenue from sales in China.

In December 2023, China banned the export of technology to make magnets for rare earths. There was also a ban on the export of technology to extract and separate the rare materials. These are consumables for the US military-industrial complex.

China is expected to impose restrictions and measures on the major arms manufacturers Lockheed Martin and RTX (formerly Raytheon), both supply weapons through US arms packages to Taiwan.

When US drone maker Skydio was sanctioned under the law in October, it quickly cut off the company’s supply of batteries, the Financial Times reported.

The US Chamber of Commerce complains that US companies, not just in the tech industry, are experiencing “go slow” actions within the Chinese bureaucracy in terms of approvals, customs clearance and inspections. “As the containment (of China) intensifies, more US industries, businesses and the entire economy will pay an increasingly high price,” the Global Times wrote in a commentary about Skydio in November. The newspaper is the CCP’s foreign policy, English-language flagship of the party’s organ, the People’s Daily (Renmin Ribao).

While We Wait for Trump

This could be a prelude to Beijing’s preparations for Trump’s inauguration in Washington on January 20, with promises to lift tariffs on Chinese goods. He has now suggested ten percent, not the sixty percent that he mentioned during his election campaign.

Trump’s harshest attacks have so far been directed at Mexico and Canada, which are part of the free trade agreement USMCA that came into effect on July 1, 2020. USMCA replaced the North American Free Trade Agreement Nafta. Here, Trump has threatened tariffs of 25 percent.

This also scares the EU. Nevertheless, it’s striking how the EU, and not least NATO, has increasingly heightened the “threat image” of China. Here, the faction containing the USA, Great Britain, Poland and the Baltic states that cover the southern part of the Baltic Sea against Russia, is on the offensive.

This is going on under the smokescreen that NATO has produced claiming that the alliance is more united than ever since the Ukraine war began. It contrasts sharply to the warnings of concern that have been issued about what Trump may do to NATO.

In Norway, this has triggered a series of moves from EU-hungry parties such as the Liberal Party and the Green Party to promote Norway seeking EU membership in order to find protection from Trump’s USA and from Russia and China.

The argument breaks down when faced with reality: the EU is ridden by the same contradictions as NATO, and the contradictions in EU will only be reinforced if the disagreements in NATO intensify. The former Soviet states and several of the Eastern Bloc countries feel politically closer to Washington than Brussels, regardless of who is a tenant at 1600 Pennsylvania Avenue.

USA v China

The USA is looking to prevent China from gaining a leading position in artificial intelligence (AI) and is expanding its arsenal of hypersonic and hyper technological weapons as part of its build-up of force, including an ocean-going navy of aircraft carrier groups.

Neither does the USA want China to become a leader in green energy and other technological sectors where Chinese companies are gaining greater global market shares. In short, it is about being able to supply the supply chains and to make them complete and safe. In this area China has made significant strategic progress through its “Belt and Road Initiative” (BRI), yi dai, yi lu, the establishment of the Asian Infrastructure Investment Bank (AIIB) and now through the expansion of BRICS+.

The chip and semiconductor conflict is also driving global prices upwards. In this area, the U.S. increasingly finds itself in a predicament due to its foreign policy of widespread use of sanctions regimes that include secondary sanctions.

(see blog: “Sanctions, a Surrogate for Warfare”)

The US-China relationship has been a roller coaster ride under President Joe Biden’s volatile foreign policy, where the near-sacred “our values, our way of living” approach has repeatedly run aground on harsh geopolitical realities, with the US in relative decline.

It’s like letting Catholicism out of the bag. First provocative actions, such as the visit of Nancy Pelosi, the Democratic Speaker emerita of the House of Representatives, to Taiwan on August 2, 2022, and new trade-related punitive measures, such as the CHIPS and Science Act – and then confession and verbal repentance by sending Secretary of State Antony Blinken and others to Beijing to defuse tensions.

With each round, the relationship has worsened and now Beijing is escalating its reactions through concrete countermeasures. One reason is that the United States has effectively put the conflict mechanisms in the WTO (World Trade Organization) out of action.

Ironically, China has emerged as the foremost defender of the WTO and global free trade in the international arena. The irony is immediately diminished by legitimate accusations from the West that China has never really acted in accordance with the WTO’s rules of engagement.

Point Zero

The ideological explanation is that Beijing, ever since China opened its doors to foreign direct investment (FDI), has challenged the imperialist division of labour between the first and third worlds, now called the “global south,” by, among other things, demanding technology transfers as part of contracts.

It’s the technological war that now has brought China and the United States to the point of zero and is causing the waves to grow slightly higher in the waters surrounding Taiwan and in the South China Sea. Under Trump, it could quickly sink to absolute zero on the political thermodynamic temperature scale if Trump supplies the goods with 60 percent tariffs.

Experts expect Trump to introduce more “tough on China” restrictions, not just in the technology sector. That could fuel hopes in the mining sector in the United States, but spell disaster for Midwestern farmers.

Another question is how the Silicon Valley billionaires who invested heavily in Trump are managing their bitcoins, now that the price of antimony has risen to more than $25,000 per ton, and the price of gallium, germanium and graphite is skyrocketing.

Translated by Johan Petter Andresen

PeterM

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