Reuters report The Biden administration is considering further restricting exports to China after Chinese legislation effectively bottlenecks exports of rare earth metals (gallium and germanium) needed to make semiconductors, the people said. . Except now, this dance is not about exporting hardware or technology. It’s actually about accessing things like: US-based cloud computing capabilities (especially those with artificial intelligence hardware). This is just the latest move in continuously escalating economic and logistical tensions. This has historically driven up the price of hardware components by adding friction to the global supply chain.
After years of poor results from technology export controls imposed by the United States on China, the United States is now embracing another loophole China is using to gain access to the latest and greatest processing power: the cloud.・It seems that you are trying to cut into computing. If you can’t get the latest chips for your own data center, you can always buy access to the chips in the cloud environment. This is exactly the scenario the White House hopes to end by forcing cloud computing providers such as Microsoft, Google and Amazon to seek licenses from the US government to serve Chinese customers. . As always, the U.S. Department of Commerce will oversee the implementation of this additional restriction, which will be implemented in the coming weeks.
Controlling about 55% of the world’s rare earth production (as of 2020), China has always been in a very strong position to implement plans to achieve technological independence from the West. Discussions are also taking place on the need to procure through supply chain routes other than China, but this is easier said than done. That will require not only finding economically viable rare earth deposits outside China’s influence, but also building the infrastructure to support it. This is no easy feat to accomplish. And China’s power comes largely from the fact that about 85% of the world’s rare earth metals must pass through processing facilities in the People’s Republic of China.
That leverage was finally exercised yesterday by China, which imposed restrictions on exports of gallium and germanium (germanium is one of the breakthrough materials that could power the next generation of semiconductors). As the world’s largest producer (and stockholder) of both rare metals, it’s not like there’s an alternative source.
For China, this is a win-win. China does not have the technical know-how to fully explore gallium- and germanium-based semiconductor designs, but it can certainly cut off access to materials and research and development. After all, China wouldn’t have been able to buy the silicon whose production was bottlenecked (due to technical export restrictions). As such, China can safely use its monopoly position to block procurement of needed minerals without losing much in trade. The technology arms race itself. Wisely, China isn’t bottlenecking essential mundane materials that could impact its semiconductor needs. Its only purpose is to stop the state of affairs.
The back-and-forth between China and the United States seems endless as the two superpowers vie for global hegemony. However, as friction increases, prices of affected products are expected to only increase. There are still plenty of ways both countries can go in this particular battle, but China appears to have a slight edge in the end. That’s what you get with any kind of monopoly (regardless of whether it’s “deserved”).