China’s move to restrict exports of certain raw materials appears to equalize restrictions on access to technology developed by the United States, which joins Japan and the Netherlands in the scheme. A move that will have its greatest impact in the short term and will be diluted over time, compared to a long-term vision that guides Chinese interests and provides another dimension to the geopolitical board. And, in this growing competition, a key element in the equation is, precisely, time. Time is what both sides want with different results if used for business strategy or geopolitics.
Nearly a year after the U.S. began its policy of restrictions, Japan in late July and the Netherlands in early September joined a strategy to slow China’s innovation pace, marking at least two technological distances. Generations in advanced chip manufacturing. A move that will delay China’s ambitions to become a technological superpower in the short term, but Beijing will not give up in the long term.
With no forecast of when China will produce 4-5nm chips, the tech elite is currently preoccupied with getting to 2-3nm, with fewer processes being more advanced, geopolitically and commercially working in China’s favor.
The dependence of American technology companies on the Chinese market is high due to both population size and China’s importance in global value chains. Five years later, first with a trade war and now with mock teasing, chip makers such as Qualcomm and Texas Instruments rely on China for 60% and nearly 50% of their sales, respectively, according to their own companies. . The dependence on the Chinese market, which also affects Japanese companies and Dutch ASML, creates a huge collateral effect on their earnings.
In this global scheme of shared dependencies, the move announced by Beijing to limit exports of gallium and germanium does not appear to have a commercial purpose, as imports from the United States will not reach $225 million in 2022. However, the time needed to reduce dependence on China, which dominates 94% of gallium supplies and 83% of Germany’s, may exceed even the most optimistic projections.
The use of gallium in compound semiconductors, solar panels and radars, and the use of germanium in fiber optic cables, night vision goggles, and solar cells influences the technological development of many industries, from chips to renewables. Diversifying the supply chain is a quick option, but as many technology countries turn to alternative supply sources, availability and prices could be affected, with a direct effect on the competitiveness of US and Japanese chip companies. Another option is self-sufficiency, where own production or reserves are possible. But building new capacity, in addition to experience, requires time, which is extremely expensive and can delay the full implementation of extraction processes for up to a decade. Along with other countries like South Korea and Russia, Japan will need less time to recover a function that led to China’s current dominance.
China is advancing its geopolitical strategy of technological self-sufficiency as the sanctions panel embarks on a new game. Although still two generations behind the tech elite, chipmaker SMIC’s mass production capacity for 7nm technology will allow Huawei to resume production of its own mobile chips before the end of the year. Likewise, the announcement of the manufacture of 28nm lithographic machines by state-owned SMEE, ASML’s only Chinese competitor, will allow China to mitigate the impact of the Dutch company’s restrictions. Again, time.
The next round of restrictions could focus on the electric car market, which could see China cement its position as the world’s largest exporter, surpassing Japan in the first quarter of this year. Along these lines, the recently released Forbes Global 500 list highlights the rise of BYD, the world’s largest electric car manufacturer, from the bottom of the list to 212th place, a clear warning of the late commitment of the Japanese automobile industry. constant motion.
The uncertain effect of restrictions on this race over time may increase the importance of raw materials over technological production. If mockery is the path to strategic autonomy, there is no time to lose, not even for Europe.
Agueda Barra Perez He is an analyst of China’s geopolitical and technological environment. Founder and editor of #ChinaGeoTech, author of “China, the routes of power” and contributor to Agenda Pública