President Biden issued a wide-reaching set of new export controls on semiconductors vis-a-vis China. On top of the export control, there are new rules which impact the ability of US citizens to work and contribute to the Chinese semiconductor industry. The move will seriously damage the Chinese dream of achieving advanced AI in the coming years. Following a global drought of semiconductor components and materials, Biden’s decision to place export controls on China may prove to be highly disruptive to Chinese interests. On the periphery, Chinese critical mineral interests in Africa, Taiwan’s semiconductor industry and US-China competition in the Indopacific have all been brought into play.
- Moreover, Chinese firms such as Tencent are extremely reliant on American-made semiconductors. Various economic limitations frustrate domestic manufacturing of semiconductors in China [source].
- When China placed export controls for rare earth minerals on Japan in 2010, Western and allied nations prioritized mineral independence. Most recently, President Biden used the Defense Production Act to enhance critical mineral production [source].
- On top of that, Canadian mining firms received permission to begin seabed mining operations between Hawaii and Mexico [source].
- China may not be able to adequately respond in a tit-for-tat fashion due in part to the fact the American executives and engineers working in the Chinese semiconductor industry have already resigned [source].
- Unlike previous export control packages, the United States held consultations with allied nations in order to shore up support and prepare for any effort by China to single out and target any participating nation [source].
- Thus far, the only publicly known response to the new export controls has been a closed door meeting of top Chinese semiconductor manufacturers and government officials [source].
- After the export controls on China were announced, shares of Chinese semiconductor manufacturers fell [source].
KJ-2: It is unlikely that Chinese critical mineral supply chains will be adversely affected by US export controls.
- The Chilean government issued a mining contract to a large Chinese automotive manufacturer to extract lithium for the next 20 years [source].
- This June, Jiangxi Ganfeng Lithium acquired the Pozuelos and Pastos Grandes lithium project in Salta, Argentina. Jiangxi Ganfeng has two other major lithium mining projects in Argentina [source].
- Chinese firms are the largest investors in nickel mining in Indonesia. These firms are gradually expanding the scope of their operations [source].
- Chinese firms own 15 out of the 19 total cobalt mines in the DRC. The Zijin Mining company purchased a 15% stake in the Manono lithium-tin project this year [source].
- Another Chinese mineral firm, Zhejiang Huayou Cobalt, purchased the Acadia lithium mine in Zimbabwe [source].
- CATL, a Chinese battery company, recently built a $7.2 billion battery manufacturing plant in Hungary [source].
- Chinese capital is entrenched in the DRC in line with critical mineral interests. Leaked documents from a bank in Gabon implicate DRC President Kabila with receiving at least $55 million from China [source].
- Moreover, Chinese mining companies in the DRC have access to sources of the Chinese state capital from state-owned banks amounting to nearly $124 billion [source].
- China has a virtual monopoly on the processing and refining of rare earth minerals due to labor costs [source].
KJ-3: It is likely that US export controls will benefit the Taiwanese semiconductor industry.
- Taiwan is heavily investing in the manufacturing of semiconductors by incentivizing foreign firms to establish a presence in Taiwan [source].
- One of Taiwan’s largest semiconductor manufacturing firms, TSMC, is considering a large expansion into Japan [source].
- TSMC is already building a factory in Japan. The Japanese government welcomes any potential expansion [source].
- TSCM produces highly valuable chips which can process high amounts of data. This makes the products highly sought-after commodities for AI and defense purposes [source].
- TSMC halted its cooperation with Chinese tech manufacturers after the US imposed new export controls on China [source].
- Although Taiwan hosts about 90% of the global manufacturing capacity for semiconductors, China contributes just 10% of TSMC’s total revenue stream [source].
- When China imposed a trade injunction on Taiwan following Nancy Pelosi’s visit, electronic components were excluded from the ban, illustrating China’s reliance on Taiwan’s products [source].
- China itself lacks the advanced equipment necessary to create semiconductors on the scale and quality which Taiwan is capable of. Export controls may deepen that scarcity [source].
Intelligence Cut-Off Date 31 October