Your Adversary Gets a Vote

As should have been expected, the Chinese government has not been content to remain passive as the U. S. attempts to bar technological exports to China and has responded by restricting exports of rare earth metals necessary for semiconductor manufacturing. Mai Nguyen reports at Reuters:

July 5 (Reuters) – China said on Monday it will impose export restrictions on gallium and germanium products used in computer chips and other components to protect national security interests.

The decision, widely seen as retaliation for U.S. curbs on sales of technologies to China, raised concerns that China might eventually limit exports of other materials, notably rare earths, whose production China dominates.

The editors of the Wall Street Journal remark:

Janet Yellen arrives in Beijing Thursday in an attempt to improve U.S.-China relations, and on Monday the Communist Party rolled out the red carpet: new export restrictions on minerals that are critical for the production of semiconductors, solar cells and other tech products. Huanying, Madam Treasury Secretary.

China’s Ministry of Commerce said that, starting Aug. 1, gallium and germanium will be subject to export controls in the name of national security. China accounts for about 94% of global gallium production, and China wants everyone to know it will use minerals as a political weapon. Beijing wants the U.S. to stop limiting tech exports to China that could have military uses, even as Beijing sprints to expand its navy and weapons to push the U.S. out of the Western Pacific.

Ms. Yellen shouldn’t fall for it. The Chinese have played the critical mineral card before, notably in 2010 when they temporarily halted exports to Japan after a collision at sea near disputed islands.

The main result of that gambit was to encourage the rest of the world to produce more rare-earth metals. The U.S. Geological Survey says China’s share of rare-earth output has fallen to 70% from 98%. The same could happen to gallium and germanium.

I’ll just repeat what I said in response to President Biden’s CHIPS and Science Act. We do need to produce more semiconductors here but that’s not enough. We need a complete supply chain for semiconductors that doesn’t run through China. Or Russia.