China hits back against US chip crackdown

China has banned exports to the United States of the critical minerals gallium, germanium and antimony, which have widespread military applications, escalating trade tensions the day after Washington’s latest crackdown on China’s chip sector.

The curbs, announced on Tuesday, strengthen enforcement of existing limits on critical minerals exports that Beijing began rolling out last year but apply only to the US market. It is the latest escalation of trade tensions between the world’s two largest economies before US President-elect Donald Trump takes office next month.

A Chinese Ministry of Commerce directive on dual-use items, which have both military and civilian applications, cited national security concerns for the export ban. The order, which takes immediate effect, also requires stricter review of end use for graphite items shipped to the US.

“In principle, the export of gallium, germanium, antimony and superhard materials to the United States shall not be permitted,” the ministry said.

Gallium and germanium are used in semiconductors while germanium is also used in infrared technology, fibre optic cables and solar cells. Antimony is used in bullets and other weaponry while graphite is the largest component by volume of electric vehicle batteries.

The move has sparked new concerns that Beijing could next target other critical minerals, including those with even broader usage, such as nickel and cobalt.

“China has been signalling for some time that it’s willing to take these steps, so when is the US going to learn its lesson?” asked Todd Malan of Talon Metals, which is trying to develop a nickel mine in Minnesota and is exploring for the metal in Michigan. The only US nickel mine will be depleted by 2028.

The US was assessing the new restrictions, but will take “necessary steps” in response, a White House spokesperson said without giving details.

“These new controls only underscore the importance of strengthening our efforts with other countries to de-risk and diversify critical supply chains away from PRC,” the spokesperson said, referring to the People’s Republic of China, China’s official name.

Representatives for Trump did not immediately respond to a request for comment.

Chinese customs data show there have been no shipments of wrought and unwrought germanium or gallium to the US this year through October although it was the world’s fourth and fifth largest market for the minerals, respectively, a year earlier.

China’s overall October shipments of antimony products plunged by 97 percent from September after Beijing’s move to limit its exports took effect.

China accounted last year for 48 percent of globally mined antimony, which is used in ammunition, infrared missiles, nuclear weapons and night-vision goggles as well as in batteries and photovoltaic equipment.

This year, China has accounted for 59.2 percent of refined germanium output and 98.8 percent of refined gallium production, according to the consultancy Project Blue.

“The move is a considerable escalation of tensions in supply chains where access to raw material units is already tight in the West,” Project Blue co-founder Jack Bedder said.

Prices of antimony trioxide in Rotterdam had soared by 228% since the beginning of the year to $39,000 a tonne on Thursday, data from information provider Argus showed.

China’s announcement comes after Washington launched its third crackdown in three years on China’s semiconductor industry on Monday, curbing exports to 140 companies.

“It comes as no surprise that China has responded to the increasing restrictions by American authorities, current and imminent, with its own restrictions on the supply of these strategic minerals,” said Peter Arkell, chairman of the Global Mining Association of China.

“It’s a trade war that has no winners,” he said.

Widening retaliation

Separately, several Chinese industry groups on Tuesday called for their members to buy domestically made semiconductors with one saying US chips were no longer safe or reliable.

Their advice could affect US chipmaking giants like Nvidia, AMD and Intel, which, despite export controls, have managed to keep selling products in the Chinese market. The three companies did not immediately respond to a request for comment from the Reuters news agency.

“China had been moving quite slowly or carefully in terms of retaliating against moves by the United States, but it seems pretty clear that now the gloves are off,” said Tom Nunlist, associate director at the research firm Trivium China.

The associations cover some of China’s largest industries – including telecommunications, the digital economy, cars and semiconductors – and combined count 6,400 companies as members.

The statements, released shortly after each other, did not detail why US chips were unsafe or unreliable.

The Internet Society of China urged domestic companies to think carefully before procuring US chips and to seek to expand cooperation with chip firms from countries and regions other than the US, according to its official WeChat account.

It also encouraged domestic firms to “proactively” use chips produced by both domestic- and foreign-owned enterprises in China.

US chip export controls have caused “substantial harm” to the health and development of China’s internet industry, it added.