US-China Tit-for-Tat Tech Wars Escalates with Rare Mineral Restrictions

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The Chinese Ministry of Commerce declared a ban on minerals exported like gallium, germanium, and antimony to the US, which are needed to produce semiconductors and military equipment.

China has banned the export of rare earth minerals to the US used for the production of crucial semiconductors, the latest move in the ongoing tech battle between the two giants.

Beijing announced the day after the US tightened regulations on the transfer of semiconductors to China, which affects China’s ability to produce AI and advanced weapons.

For many months, both countries have been involved in tic-for-tat export restrictions. The US aims to undermine China’s military and AI advances and hinder it from becoming the global leader in clean energy.

US trade and diplomatic relations with China have reached their lowest level under President Joe Biden in recent years, more due to tech wars.

This recent conflict was just before Trump took office in January. He, too, will adopt a strict approach towards China and pledged to impose strict rules on Beijing, including a 60% tariff on all Chinese products.

On Monday, the US broadened export restrictions on chip manufacturing equipment needed for China and imposed sanctions on Chinese companies.

The new measures were to limit the shipment of high bandwidth memory chips to China, which are needed to develop advanced applications like AI training. It was to hinder China from manufacturing semiconductors for high-tech products and restrict the progress in advanced AI development.

Washington’s ban also included 140 companies, which prohibits trade with the US or nations allied with the US. The companies affected are China or Chinese companies in Japan, South Korea, and Singapore.

Japan and the Netherlands also produce a significant amount of advanced semiconductors and are pressured by the US to restrict exports to China.

The Netherlands agreed to US restrictions on the export of advanced semiconductors in September 2023 and plans to increase the curbs in line with the US. The US is negotiating with Japan, but they have not reached a formal agreement.

After the US announcement, authorities in Beijing stated that they would protect their country’s interests by imposing new rules on exports of dual-use products that can be used for both military and civilian purposes.  

The Chinese Ministry of Commerce declared a ban on minerals exported like gallium, germanium, and antimony to the US, which are needed to produce semiconductors and military equipment.

China introduced a new regulation for exporters who need special licenses to export gallium and germanium to the US in July 2023. In October 2023, Beijing imposed a stricter rule on sales of graphite products, which are needed to produce car batteries.

China banned hard materials like lab-grown diamonds and synthetic materials needed for industrial applications.

New regulations require exporters to disclose who their end users are so that Beijing can track them. This is done because Chinese authorities think that the US is ‘misusing export controls.’

China trade groups have criticized the Washington ban as it will affect global supply chains and raise costs for US companies. In a statement, the China Association of Automobile Manufactures stated that this move deflects the concept of fair competition, weakens the international trade framework, and is ultimately a disadvantage for all countries involved.

These minerals are rare earth elements and can be mined only in limited quantities. They are used to produce weapons, semiconductors, computer chips, and electric vehicles. Chips are essential for AI development.

For example, gallium is used to manufacture LED displays, automobiles, solar panels, and next-generation weapons. Antimony to produce batteries, night vision goggles, and military equipment.

Mining such minerals is challenging since it can cause erosion and pollution, but China is the largest supplier of gallium, producing over 600 tonnes in 2022, which accounts for 98% of the gallium exports.

China also is the leading manufacturer of semiconductors. According to the US Geological Survey, the US gets half of its gallium and germanium from China and has produced its own in years.

The US heavily depends on Taiwan for exports, which produces over 60% of the world’s advanced chips. Taiwan is also the focus of the tech wars. The US wants Taiwan to be self-declared independent, and China considers Taiwan to be part of its territory.

Experts predict that the US, under Trump, will impose more rules on chips and related technologies to hinder Beijing’s ambitions.

However, companies manufacturing semiconductors face the consequences since export restrictions raise the prices.

For example, antimony prices have increased to more than $25,000 per tonne. Similarly, gallium, germanium, and graphite are also becoming costly.