China curbs a ‘potential bargaining chip’ to counter US-led semiconductor ban, say experts

Beijing’s decision to impose export controls on critical raw materials used in manufacturing semiconductors, communication equipment and solar panels could complicate the US-led efforts to shift critical supply chains away from China, experts said on Monday, as it seeks to gain leverage in negotiations with Washington over access to core technology.

“If China chooses to weaponise these supply chains, it will greatly complicate the calculus in the US, EU and Asia in terms of reducing dependence on China,” an effort that is just beginning, said Paul Triolo, a senior associate at the Center for Strategic and International Studies, a think tank in Washington.

He added that it would take “considerable time and investment to recreate even a portion of critical mineral supply chains”, stressing that Beijing “almost certainly sees these controls as a potential bargaining chip, which it could use to attempt to convince the US and Western governments to roll back elements of recent export controls on semiconductors and semiconductor manufacturing equipment”.

Starting on August 1, exports of gallium, germanium and several other industrial compounds will be subject to restrictions in order to “safeguard national security and interests”, China’s Ministry of Commerce and Administration of Customs announced on Monday. Exporters will be required to have approval from the State Council, China’s cabinet, for the listed items.

The announcement came just hours after US Treasury Secretary Janet Yellen’s plans to visit Beijing this week were made public.