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China has banned shipments to the United States of several “dual-use” minerals and metals used in semiconductor manufacturing and military applications. This is Beijing’s rapid retaliation for Washington’s export restrictions, which caused the stock prices of major Chinese tech companies to fall by 10%. .
China’s Ministry of Commerce announced on Tuesday that it will not allow dual-use items related to gallium, germanium, antimony and carbide materials to be exported to the United States, and will introduce stricter regulations for graphite-related items.
“The United States has expanded the concept of national security, politicized and weaponized trade and technology issues, and abused export control measures,” the country said in a statement.
“In order to protect national security…China has decided to strengthen export controls on dual-military goods to the United States,” it added, noting that the measures would take effect immediately.
Four major Chinese industry groups representing the internet, auto, semiconductor and telecommunications industries reacted to the US move by calling on their members to reduce their purchases of US-made semiconductors.
The China Semiconductor Industry Association said, “American chip products are no longer safe or reliable, and related industries in China should be cautious about procuring American chips.”
The embargoed minerals and metals are used to make semiconductors and batteries, as well as parts for communications equipment and munitions such as armor-piercing ammunition.
The Chinese government has already tightened export controls in response to tougher Western chip sanctions, and restrictions on shipments of germanium and gallium have nearly doubled the price of the minerals in Europe.
China’s recent ban on shipments to the United States makes clear that President Xi Jinping’s government is willing to target Western economic interests to counter Washington’s chip restrictions.
It also highlights China’s dominance in the world’s supply of dozens of critical resources. China produces 98 percent of the world’s gallium supply and 60 percent of germanium, according to the U.S. Geological Survey.
The US government on Monday imposed a new set of sanctions aimed at slowing the development of China’s semiconductor industry.
These include tightening restrictions on exports of critical semiconductor manufacturing tools and banning exports of advanced high-bandwidth memory (HBM) chips, a critical component of artificial intelligence products, to China.
But Bernstein analysts said U.S. regulations were generally less stringent than expected. Japanese chip equipment suppliers appear to be benefiting from tighter regulation, with chip stocks driving the Nikkei Stock Average to a three-week high on Tuesday. Tokyo Electron rose 4.3%, while Disco Corp and Lasertec rose 6.1% and 4.3%, respectively.
The U.S. government also added 136 Chinese companies to the U.S. trade blacklist, including Wingtech, a major supplier to Apple and Samsung, that were in the process of acquiring foreign semiconductor technology.
Since 2018, Wingtech has spent more than $4 billion to acquire Dutch semiconductor group Nexperia. It also attempted to buy Newport Wafer Fab, the UK’s largest chipmaker, but was ultimately blocked by the UK government.
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The U.S. blacklisting sent Wingtech’s Shenzhen-listed shares down more than 10% in two days as the Chinese company struggles to balance the delicate balance between growing its international business and supporting the Chinese government’s domestic policy priorities. It became clear that there was.
Wingtech had previously acquired an Apple-related camera module business from another Chinese group after being hit with sanctions in 2020.
“Western companies no longer buy from us,” said a manager at a blacklisted Chinese company. “For two years, our growth basically stopped as we replaced foreign parts.”
86 Research’s Charlie Chai said Wingtech could be split up if necessary to maintain overseas operations. He noted that the latest U.S. regulations close loopholes that make it difficult for Chinese semiconductor companies to buy overseas equipment.
“It’s become a classic cat-and-mouse game, but the room for maneuver for Chinese companies is rapidly shrinking,” he said.
Wingtech did not respond to a request for comment. Nexperia said the U.S. regulations do not apply to it or its subsidiaries.
Reports from Ryan McMorrow and Eleanor Alcott in Beijing, Christian Davis and Song Jeong-ah in Seoul, Harry Dempsey in Tokyo and Andy Bounds in Belgium
