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Late last month, China announced a new set of export controls — this one on certain drones and drone-related equipment — to “safeguard national security interests.”

According to Reuters, the export restrictions on equipment will enter into effect on September 1.

The move follows on the heels of recently-announced export restrictions on gallium and germanium, which are to take effect this week, and ties into the context of escalating tensions between China and the United States on the trade front and over technology access.

A recent editorial published by the state media tabloid The Global Times cited by Reuters made clear that “the imposition of controls on exports on some gallium and germanium products was a ‘practical way’ of telling the U.S. and its allies that their efforts to curb China from procuring more advanced technology was a ‘miscalculation’.”

Leaving no doubt about China’s willingness to use its leverage in the tech wars, China’s ambassador to Washington, Xie Feng, warned of Chinese retaliation against U.S. national security measures targeting Beijing at the Aspen Security Forum in mid-July. As reported by the Financial Times, the ambassador said that “China ‘cannot remain silent’ while the U.S. imposes sanctions and export controls that will make it harder for China to secure advanced U.S. technology, including cutting-end chips.”

Xie delivered his remarks as the U.S. administration is preparing an investment screening mechanism designed to cut the amount of U.S. money making its way into Chinese entities “involved in areas including semiconductors, quantum computing and artificial intelligence that could help its military.”

As followers of ARPN know all too well, China is no stranger to playing politics with its critical minerals and tech leverage, and ARPN has been tracking the weaponization of trade in the semiconductor segment in the context of the Tech Wars between the U.S. and China since 2020.

The ratcheting up of export controls should serve as fresh impetus for the United States to secure reliable supply of the critical minerals and products needed for chip manufacturing and and other hi-tech industries — such as the drone segment — independent of China.

Whether or not the U.S. will act in time to do so, is not, according to ARPN’s Daniel McGroarty, “a question of science or engineering or who boasts the best single atomic layer deposition techniques. It’s a question of political will.  And if the ultimate goal is to reshore American control over our economic destiny and national security, the answer is due right now.”

To read McGroarty’s 2020 piece dedicated to the issue and published by The Economic Standard, click here.

China’s latest moves, including the drone-related curbs, have make clear it won’t shy away from escalating the Tech Wars.

Beijing’s recent decision to impose export restrictions on gallium and germanium – key components of semiconductor, defense and solar technologies — has ruffled feathers around the world and, as ARPN noted, ratchets up the weaponization of trade in the context of the Tech Wars between China and the West.

While some chipmakers have played down fears of shortages, former Chinese Vice Commerce Minister Wei Jianguo’s comments to the China Daily newspaper “that countries should brace for more should they continue to pressure China, describing the controls as a ‘well-thought-out heavy punch’ and ‘just a start,’” have prompted fears that more export curbs on critical materials, including on rare earths could be on the menu.

With China controlling roughly 90 percent of the global refined output of rare earths, and the specter of more Chinese export controls looming large, analysts suggest that the United States and its partners must kick their efforts to reduce their reliance on Chinese into high gear.

According to Goldman Sachs analysts, “China is the source of more than 70 percent of the world’s [neodymium and praseodymium] and accounts for over 90 percent of the downstream metal and magnet segment.”

To replicate China’s annual output of 50,000 tons, the West would have to invest anywhere between $15 billion and $30 billion, Goldman says.

The Goldman analysis brings into focus the immense challenges associated with decoupling from China — most notably perhaps permitting:

The analysts note that while demand for NdPr could exceed supply from 2028 onward in light of surging demand in the EV and wind turbine segment, “out of more than 20 projects outside China that could produce some 20,000 tons of NdPr annually, (…) only two to three of these projects can get off the ground this decade.”

Both the United States and the European Union have resolved to make permitting reform a key priority. In the U.S. Senate Majority Leader Chuck Schumer (D-N.Y.) just told his colleagues that the push would be a focus in the weeks leading up to the August recess, while the European Union’s recently released Critical Raw Materials Act (CRMA) calls for streamlining the permitting process for raw materials projects.

However, as followers of ARPN well know, all affirmations of a desire to strengthen domestic supply chains aside, the perennial not-in-my-backyard (NIMBY) sentiment is still strong – not just in the United States, but also in Europe.

Meanwhile, the urgency for reform cannot be overstated, as Beijing will not slow down its global quest for resource dominance, and the critical minerals arms race in the context of the Tech Wars will continue to heat up.

Earlier this week, China placed export restrictions on gallium and germanium – key components of semiconductor, defense and solar technologies.  The unspecified restrictions are set to take effect on August 1, 2023. Beijing’s move is considered a “show of force ahead of economic talks between two rivals that increasingly set trade rules to achieve technological dominance,” according to the Wall Street [...]

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Chilean President Gabriel Boric’s April announcement of his plan to nationalize the country’s lithium industry to boost the Latin American nation’s industrial base and protect the environment may have prompted observers to declare his action a “shock move,” but as ARPN outlined in our last post, the “shock seems to result from global observers who are still learning to [...]