Trade dispute escalates USA and China impose massive export stops on each other

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New restrictions by the US government against 140 Chinese companies escalate the conflict with China over technological dominance in the chip industry. China promptly responds with an export stop on semiconductor metals.

The aim of the American measures is to slow down China's progress in strategic areas such as artificial intelligence (AI) and military applications. Around 140 Chinese technology companies are affected, including big names like the Naura Technology Group, Piotech, and SiCarrier Technology.

As an immediate response, China banned the export of critical raw materials such as gallium, germanium, and antimony to the USA just one day later. These materials are essential for semiconductor manufacturing as well as military and other high-tech applications. The ban could significantly burden global supply chains and demonstrates the strategic consequences of the increasing trade tensions between the two economic powers.

Broad restrictions hit China's high-tech industry

The new regulations of the Biden administration mainly affect the export of advanced memory chips and chip manufacturing tools. These technologies are essential for the production of advanced semiconductors used in applications such as self-driving cars, speech recognition systems, and surveillance technologies, as well as in military equipment like targeting systems and radar. Key measures include the addition of 23 Chinese companies associated with the technology company Huawei to the so-called Entity List. Companies on this list are largely prohibited from acquiring US technology, significantly restricting their business operations.

In addition, shipments of equipment necessary for the production of cutting-edge chips are to be limited. Companies like ASML, a Dutch manufacturer of lithography machines, have already been prevented from exporting advanced machines to China due to previous US measures. Now, pressure is increasing on the USA's international partners to introduce or tighten similar restrictions.

China criticizes but remains unimpressed

China reacted sharply to the new US measures, calling them "economic coercion" and an attempt to deliberately hinder China's technological development. Beijing emphasized that the USA was violating international trade norms and exerting disproportionate pressure. The export ban decided as a result for gallium, germanium, and antimony primarily affects industries that rely on processing these materials. Analysts warn that such a move could severely disrupt global supply chains.

At the same time, Chinese companies are striving to reduce their dependence on foreign technology. Manufacturers like Jiangsu Nata Opto-Electronic Material and Empyrean stated that they have sufficient inventories and are relying on domestic alternatives in the supply chain. However, these adjustments might not be sufficient in the medium term to close the technological gaps created by the new restrictions. The affected Chinese chip companies report confidence in being able to switch to domestic supply chains more quickly.

Geopolitical implications: Not all US partners are participating

The USA is trying to involve international allies like Japan, South Korea, the Netherlands, and Taiwan in its measures. These countries play a key role in the global semiconductor supply chain and could increase pressure on China through stricter export controls. However, there are exceptions in some cases. For example, Japan and the Netherlands have indicated that they will not fully implement all US measures. Other countries, such as South Korea and Taiwan, are subject to specific regulations that affect their trade relations with China.

The intensified US measures underscore the strategic importance of the semiconductor industry in the global power structure. Semiconductors are considered "the new oil" of the modern economy as they are the foundation for almost all digital technologies.

Outlook: new alliances, fragmented technology landscape

The long-term effects of the new US export controls remain unclear. Possible scenarios range from an increased decoupling of supply chains, which could fragment the technological landscape, to an innovation race that brings forth new alliances. While analysts point out that some Chinese companies might be able to bridge short-term shortages through inventories and local solutions, the ongoing pressure could significantly impact the competitiveness of the Chinese semiconductor industry. At the same time, new alliances might form in the global technology landscape as countries and companies attempt to reduce their dependence on both the USA and China. (mc)