China is preparing to escalate its retaliation against the United States over the ongoing tech war, with a particular focus on its Asian allies. The U.S. has imposed sweeping restrictions on the export of advanced semiconductors and other crucial technologies to China, which has significantly hindered the country’s progress in artificial intelligence (AI). As the U.S. continues its efforts to limit China’s access to cutting-edge technology, Beijing is shifting its focus towards Asian countries like Japan and South Korea, which have deep economic ties to China.
In 2022, President Joe Biden’s administration introduced a series of measures aimed at blocking China’s access to advanced chips and chipmaking equipment, including products from Dutch company ASML and Japan’s Tokyo Electron. This included adding over 100 Chinese entities to the U.S. trade restriction list by the end of 2023. In response, China has begun restricting exports of vital materials like gallium, germanium, graphite, and antimony, which are essential for producing semiconductors, batteries, and military equipment. However, China’s retaliation appears to be intensifying. It recently introduced a blanket ban on the export of certain critical materials to the U.S., marking its strongest response yet.
Despite these measures, China is facing increasing challenges in the AI sector. Chinese tech giants like Tencent and Baidu are running out of banned Nvidia chips, which were previously vital for training AI models. With domestic alternatives lagging behind, particularly Huawei’s semiconductor products, China’s efforts to catch up with the U.S. in AI could be delayed further.
Meanwhile, China’s near monopoly on rare earths and other critical minerals has become a key area of leverage. The government has been implementing stricter regulations on the mining, smelting, and trading of these materials, which are essential for industries like electronics, green energy, and defense. Beijing’s export restrictions on these materials also include new rules that require businesses to disclose detailed information about their overseas customers and the end use of the goods.
While these moves may hurt U.S. companies like Micron Technology and Tesla, China’s leverage over its Asian neighbors is far more significant. Japan depends on China for nearly a third of its imports, and South Korea’s reliance on Chinese materials for semiconductor production has only increased. These vulnerabilities put companies like Toyota, SK Hynix, and Samsung Electronics at risk if China decides to restrict their access to essential raw materials.
The threat of export controls could be enough to force countries like Japan and South Korea to reconsider their stance on the U.S.-China tech conflict. With both sides ramping up pressure, China’s next move could target its regional allies, demonstrating the global impact of this tech war.
Source – https://www.reuters.com/breakingviews/us-china-tech-war-will-hold-asian-allies-hostage-2024-12-16/