In the ongoing power struggle between the United States and China, there have been recent developments that further highlight the strategic competition between the two countries. Although there have been talks between the two nations, little has changed in the overall picture of their relationship.
Ahead of Treasury Secretary Janet Yellen’s visit to China, Beijing made an announcement regarding export controls on critical materials necessary for semiconductor production. This move is seen as a retaliatory response to the US’ increasing export controls that target the development of its own industry. The materials in question, gallium and germanium, are predominantly exported by China, which holds the majority of the global supply. These metals are not only essential for semiconductors but also used in products such as solar panels. The US, lacking domestic production of gallium and germanium, heavily relies on imports. Therefore, Beijing’s decision to impose export controls strikes a critical strategic weakness in Washington’s attempts to reshape the global semiconductor supply chain.
The growing Cold War between the US and China centers around control over supply chains, particularly key materials and the ability to produce essential goods. Since the Trump administration came into power, the US has increasingly focused on great-power competition as part of its foreign policy, believing that open markets and global supply chains have empowered states hostile to American interests. As a result, supply chains have been politicized to justify American control and maintain global dominance.
US officials often discuss the concept of “resilient supply chains,” which essentially means diversifying and re-shoring critical goods production to reduce China’s manufacturing monopoly and hinder its progress in critical technology. The US has blacklisted several Chinese technology companies, blocking their access to critical technologies, and has also restricted the export of semiconductor-making equipment to China by leveraging its alliances.
While Washington has pressured semiconductor firms to establish production capacity in the US with promises of subsidies, seeking to reshape the global technology supply chain around itself, China has been cautious in its response. However, in recent months, China has begun to exert pressure on the US in the semiconductor sector. A flaw in the US strategy is its lack of direct access to all the raw materials necessary for semiconductor production. China has seized this opportunity and announced export controls specifically targeting the US. It is unlikely that these controls are aimed at Asian countries heavily reliant on Chinese materials for their own industries, such as South Korea.
The logic behind this move is twofold. Firstly, it aims to impede the US’ semiconductor production ambitions by increasing costs and decreasing efficiency. Secondly, it forces Asian semiconductor industries to continue investing in Chinese production by limiting their options. This allows China to maintain control over the supply chain and prevents the US from achieving its goal of a de-Sinicized semiconductor industry or building alternative supply chains in rival states like India.
This development highlights the shortsightedness of the US’ attempts to hinder China’s semiconductor rise. When a nation possesses critical commodities or materials, it is nearly impossible to isolate it from global markets when the demand for those goods is essential. The West’s inability to exclude Russia from global energy and commodity markets serves as an example. While the US may be forced to obtain gallium from more expensive sources or intermediaries, it ultimately leads to higher costs and counterproductive outcomes. These “anti-globalization” policies not only harm the US but also have negative repercussions for the global economy.
In conclusion, the strategic competition between the US and China continues to intensify, with recent developments regarding export controls on critical materials for semiconductor production. This highlights the ongoing struggle for control over supply chains and the challenges faced by the US in its attempts to reshape the semiconductor industry. The importance of critical materials and the difficulty of isolating nations with such commodities from global markets underscore the limitations of anti-globalization policies.