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The US-China tech race is moving from chips to the raw materials they're made of
- Rare earths play a key role in the global race for AI dominance between the US and China, and are often compared to oil in the Middle East.
- China accounts for 60% of the world's rare earth supply and 90% of global refining output. It has recently tightened its grip on the rare earths sector, which has been met with concerns over supply chain shocks.
- China's processes and refines critical minerals used in tech products, leaving the US vulnerable to supply chain shocks and potentially undermining its economic and national security.
- China's increased control over rare earths resources could be used as leverage in a trade war between the US and Beijing, as chips are at the forefront of the conflict. Taiwan Semiconductor Manufacturing Company is the key supplier to AI chip giant Nvidia, one of the most powerful companies in the tech rivalry.
- An Oxford Economics report published in July suggested that if the trade dispute between the US and China escalated then China might pull its rare earths card.
- Beijing's moves to control critical minerals and rare earths are part of its broader toolbox developed over the past four years. This is why some analysts have drawn comparisons between the US-China conflict and the Cold War.
- The US is also considering limiting export licenses for Nvidia and AMD chips in an unfolding trade war that has also hit several sensitive industries.
- In the 2020s, various countries are trying to diversify their rare earth supply chains due to the high cost of investment and environmental concerns.
- There are fears that if China tightens the supply chain for rare earths even more, it could leave the US open to supply shocks, driving up inflation for end products
- Economic and foreign relations experts say the dynamics between the US and China during this tech race is creating two parallel systems, as the US and China are dividing themselves and their allies into their own separate camps.
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