China has launched a significant counteroffensive in the ongoing semiconductor war with the United States, announcing an immediate ban on exports of critical materials used in chip manufacturing. This move comes as direct retaliation against President Biden’s third wave of sanctions targeting China’s semiconductor industry.
The Chinese Ministry of Commerce announced Tuesday that it would halt all exports to the US of “dual-use” materials—items that serve both civilian and military purposes. The ban encompasses gallium, germanium, antimony, and superhard materials, along with stricter controls on graphite exports. These materials are essential components in manufacturing semiconductors, batteries, advanced electronics, and solar panels—all critical infrastructure for AI development and deployment.
The timing and scope of China’s response underscore the intensifying technological race between the two superpowers, particularly in artificial intelligence and military technology. The US faces significant vulnerability in this conflict, as it depends heavily on Chinese imports for these critical materials. According to the US Geological Survey, China produces 98% of the world’s germanium supply, while the US also relies substantially on Chinese gallium and antimony imports.
Research published by the US Geological Survey in November warned that losing access to germanium and gallium imports could result in “billions of dollars in losses” across the American economy, with the semiconductor industry bearing the brunt of the impact. This economic threat carries profound implications for US AI development, as advanced chips are the foundation of modern AI systems.
China’s retaliation follows Biden’s Monday announcement of restrictions on 140 Chinese companies, including tech giants Huawei and Semiconductor Manufacturing International Corp (SMIC). US Commerce Secretary Gina Raimondo characterized these measures as “the strongest controls ever enacted by the US to degrade the People’s Republic of China’s ability to make the most advanced chips that they’re using in their military modernization.”
The conflict is poised to intensify under the incoming Trump administration. During his first term, Trump imposed tariffs of up to 25% on Chinese goods, and he campaigned on promises to increase that to 60% if necessary. In a June 2024 interview, Trump explicitly identified China as the “main threat” to the US AI industry, signaling continued pressure on China’s technology sector.
China’s commerce ministry condemned the US actions, stating that America has “broadened the concept of national security, politicizing and weaponizing trade and technology issues, and abused export control measures.”
Key Quotes
The US has broadened the concept of national security, politicizing and weaponizing trade and technology issues, and abused export control measures.
China’s Ministry of Commerce issued this statement justifying the immediate export ban on critical semiconductor materials, framing the action as a defensive response to American aggression in the technology sector.
The strongest controls ever enacted by the US to degrade the People’s Republic of China’s ability to make the most advanced chips that they’re using in their military modernization.
US Commerce Secretary Gina Raimondo described Biden’s latest restrictions to reporters, emphasizing the unprecedented nature of the sanctions and their specific targeting of China’s military AI capabilities.
Billions of dollars in losses across the US economy, with the fallout concentrated most in the semiconductor industry.
The US Geological Survey warned in November research about the economic consequences of losing access to germanium and gallium imports from China, highlighting the vulnerability of America’s chip manufacturing ecosystem.
Our Take
This tit-for-tat escalation reveals a fundamental paradox in the global AI race: both superpowers need each other to succeed, yet both view the other as an existential threat. The US possesses superior chip design capabilities and manufacturing equipment technology, while China controls the raw materials pipeline. Neither can achieve technological supremacy alone.
What’s particularly concerning is the timing—this conflict intensifies just as AI development reaches a critical phase requiring massive computational resources. The real losers may be AI researchers and companies caught in the crossfire, facing supply shortages, inflated costs, and fragmented markets. We’re witnessing the birth of a bifurcated technological world where Chinese and Western AI ecosystems develop independently, potentially setting incompatible standards and limiting the technology’s global potential. The incoming Trump administration’s hardline stance suggests this conflict will deepen before any resolution emerges, fundamentally reshaping how AI technology develops over the next decade.
Why This Matters
This escalating chip war represents a critical inflection point for the global AI industry. Semiconductors are the lifeblood of artificial intelligence—from training massive language models to deploying AI applications at scale. Without access to advanced chips or the materials needed to manufacture them, AI development grinds to a halt.
The mutual restrictions create a dangerous interdependency crisis. While the US seeks to prevent China from accessing cutting-edge chip technology that could advance its military AI capabilities, China controls the raw materials necessary for chip production worldwide. This standoff could fragment the global semiconductor supply chain, forcing companies to choose sides and potentially slowing AI innovation globally.
For AI companies and tech giants, this conflict introduces significant uncertainty. Firms like NVIDIA, AMD, and Intel face restricted access to the Chinese market while simultaneously confronting potential material shortages. Meanwhile, Chinese AI companies like Baidu, Alibaba, and ByteDance must navigate severe limitations on accessing the most advanced chips needed for frontier AI research.
The broader implication extends beyond immediate supply chain disruptions—this conflict is reshaping the geopolitical landscape of AI development, potentially creating parallel technological ecosystems with different standards, capabilities, and applications. The outcome will determine which nation leads the AI revolution and sets the rules for this transformative technology.
Recommended Reading
For those interested in learning more about artificial intelligence, machine learning, and effective AI communication, here are some excellent resources:
Recommended Reading
Related Stories
- Biden hails $20B investment by computer chip maker in Arizona plant
- Jensen Huang: TSMC Helped Fix Design Flaw with Nvidia’s Blackwell AI Chip
- US to ban exports of car software to China and Russia
- The Artificial Intelligence Race: Rivalry Bathing the World in Data
Source: https://www.businessinsider.com/china-biden-chip-export-restrictions-materials-ban-ai-trump-2024-12