US Tightens Imports of Old Semiconductors from China... China Retaliates with Rare Earth Technology Export Ban

U.S. Department of Commerce's Bureau of Industry and Security
Survey on Semiconductor Procurement and Usage by Over 100 U.S. Companies
Sanctions Extend from Advanced to Legacy Semiconductors
China Retaliates by Banning Rare Earth Processing Technology Exports

The United States is considering imposing tariffs on outdated Chinese semiconductors entering the country to block China's semiconductor technology development. This move targets not only advanced Chinese semiconductors but also the production of older semiconductors. China, which controls the global mineral market, has launched a counterattack by deciding to completely ban the export of rare earth processing technology. Although the U.S. and China resumed high-level military talks after one year and four months, conflicts between the two countries over advanced technology supremacy and strategic materials are intensifying.

[Image source=Yonhap News]

According to Bloomberg on the 21st (local time), the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) plans to investigate how about 100 companies, including those in the automotive, aerospace, and defense sectors, procure and use outdated semiconductors starting January next year.

The BIS investigation targets outdated Chinese semiconductors. A Commerce Department official explained that Chinese semiconductor manufacturers have launched a low-price offensive to undermine competitors and that the U.S. wants to prevent market domination through price offensives, as seen in the steel and solar industries. To this end, the U.S. is considering trade measures including tariffs.

Earlier, U.S. Secretary of Commerce Gina Raimondo stated, "We have witnessed concerning practices over the past few years where China has expanded the production of outdated semiconductors by its domestic companies, making competition difficult for U.S. firms," adding, "(The upcoming) investigation will provide information for the next steps." She said, "We will use all available means," but clarified that export control measures would not be implemented to prevent oversupply of outdated semiconductors.

The U.S. expects this investigation to limit China's "semiconductor subsidy dumping" and to gradually exclude Chinese semiconductors from the supply chains of U.S. defense contractors.

So far, the U.S. has banned exports of advanced semiconductor equipment and advanced semiconductors to China since last year to curb China's semiconductor technology development. This time, the attempt to block the development of outdated Chinese semiconductors is drawing more attention. The aim is to raise the import barrier for outdated Chinese semiconductors to prevent China from dominating the market and building technological capabilities through low-price offensives.

Additionally, the Biden administration is also considering raising tariffs on Chinese products such as electric vehicles (EVs), solar products, and EV battery packs. With the presidential election next year approaching, this is interpreted as a strategic move to restrict imports of Chinese products that are launching low-price offensives backed by government subsidies and to emphasize the message of strengthening domestic industrial competitiveness.

China has responded with a countermeasure to the U.S.'s strengthened sanctions against China. The Chinese Ministry of Commerce announced the day before that it would ban the overseas export of rare earth extraction and separation technologies and some technologies used in rare earth magnets. Following export controls on key semiconductor materials such as gallium and germanium in August and graphite in December, China has now extended controls to rare earth processing technology exports.

This is interpreted as a retaliatory measure in response to the U.S.'s accelerated efforts to isolate China from the global supply chain through semiconductor export controls. According to the International Energy Agency (IEA), China controls 60% of the world's rare earth production and 90% of processing and refining technology. As Western countries, including the Group of Seven (G7), hasten preparations to reduce dependence on Chinese critical minerals, China is also accelerating industrial protection measures and efforts to maintain market dominance.

Foreign media analyzed, "China's ban on the export of rare earth processing technology is a signal from the Xi Jinping government to counter U.S.-led measures aimed at suppressing sales of advanced computer semiconductors by Chinese companies," adding, "The new export control measures risk further escalating geopolitical tensions between China and the U.S. and its allies over global resource and technology supply chains."

This content was produced with the assistance of AI translation services.