Semiconductors have become indispensable components for a broad range of electronic devices.
They are not only “the material basis for integrated circuits that are essential to modern day life” – the “‘DNA’ of technology” which has “transformed essentially all segments of the economy,” they are also essential to national security, where they enable the “development and fielding of advanced weapons systems and control toe operation of the nation’s critical infrastructure,” as the Department of Commerce-led chapter in the Biden Administration’s 100 Day Supply Chain Review report outlines.
As such, they sit at the heart of U.S.-Chinese tech competition, and have been dubbed “the next frontier in the tech battle between the U.S. and China” for good reason.
In his State of the Union address last month, U.S. President Joe Biden touted last fall’s passage of the CHIPS and Science Act allocating new funding for research, development and production of semiconductors, which has spurred private investment in the sector. Following on the heels of the new law, the Commerce Department in October applied new export controls to China’s access to advanced computing chips, its ability to develop and maintain super computers and manufacture semiconductors.
As Shubham Dwivedi and Gregory D. Wischer wrote last month for RealClearEnergy, “[t]he subsequent chip measures were clinically targeted at critical chokepoints in the global chip supply chain, and have since been backed by important partners, including Japan and the Netherlands, two key players in the advanced semiconductor ecosystem.”
But the semiconductor space is just the tip of the proverbial iceberg.
Write Dwivedi and Wischer:
“Semiconductors require various minerals such as silicon, gallium, arsenic, cobalt, and more. Silicon is the most common foundational material for chips today, while gallium arsenide is the second most common. Cobalt is increasingly important for advanced chips too.”
As long as China controls critical mineral supply chains – and a look at the latest USGS Mineral Commodity Summaries leaves no doubt about that, semiconductor supply chains – and as such national security will still be jeopardized.
In their quest to alleviate “undue geopolitical leverage,” U.S. allies like Canada, and more recently Australia, have taken steps to reduce Chinese influence in their critical mineral industries.
A proposal to bolster the Investment Canada Act (ICA) to empower government ministers to block or unwind critical mineral investments if these are considered as a threat to national security, considered a defensive measure against China which has invested $7 billion in Canada’s base metals sector in the past two decades, is expected to be finalized this spring. Prior to the unveiling of the proposal, Canadian officials had ordered Chinese companies to sell their stakes in three Toronto Stock Exchange-listed companies last fall.
Australia’s Treasurer Jim Chalmers recently blocked a request by a Chinese company to boost its investment in Australian REE company Northern Minerals via a prevention order, the first move of this kind since the Treasurer had expressed concerns over the “concentrated nature of the China-dominated critical minerals supply chain” elevated by the Russia-Ukraine war.
When Dwivedi and Wischer published their piece in February, they lamented that the CHIPS and Science Act represents a missed opportunity to strengthen the U.S. domestic critical mineral industry, and urged Congress to take up legislation to not only provide funding for domestic critical mineral projects, but rather also reform the cumbersome permitting system.
Since then, House Republicans have put forth the Transparency, Accountability, Permitting and Production of (TAPP) American Resources Act, H.R. 1 which seeks to bolster U.S. critical mineral supply chains by reducing red tape, entry barriers and redundancies, and reforming the National Environmental Policy Act (NEPA) to provide industry with clearer timelines and more certainty, and would emulate, to an extent Canada’s and Australia’s approach to curbing Chinese influence by seeking to limit Chinese and other “bad actors’”involvement in the U.S. critical minerals industry.
H.R. 1 will only be an opening salvo in the discourse over securing the supply chains underpinning 21stCentury technology, but it is becoming increasingly clear that the West has woken up to the seriousness of its over-reliance on Beijing, and the tech arms race is heating up.