China Threatens Retaliation Over US Plans to Expand Chip Export Restrictions

Key Takeaways

• The Biden Administration is reportedly considering expanding export restrictions aimed at Chinese chipmakers.
• Beijing has warned that escalating control measures could prompt it to take “necessary actions” to protect the interests of Chinese businesses.
• From batteries to raw materials, China has plenty of levers to apply pressure in return.

While the rest of the world is preoccupied with the prospect of a more extensive U.S.-China trade war when Donald Trump takes office, the global semiconductor industry has been dealing with escalating tensions between the two superpowers for years.

Now, after two years of mounting sanctions during the Biden Administration, there are signs that Beijing is preparing for a more forceful response.

U.S.-China Chip War

Although U.S. export restrictions already prohibit firms from shipping powerful AI chips and semiconductor manufacturing equipment to China, recent reports suggest the White House could unveil yet more sanctions.

According to Reuters, the latest proposal could add  up to 200 Chinese chip companies to a U.S. blacklist that prevents suppliers from shipping them goods.

The expanded restrictions may also incorporate High Bandwidth Memory (HBM) chips among the restricted goods for the first time.

Such a move would represent a major expansion of the U.S. sanctions regime with consequences that reach far beyond the semiconductor industry.

Any additional sanctions would apply to major chipmakers in Taiwan and South Korea, the latter of which produces most of the world’s HBM chips.

Asked about the anticipated new restrictions at a news conference on Thursday, Nov. 28, Foreign Ministry spokesperson Lin Jian said  China “strongly opposes” the measures, which he said could “destabilize global industrial security.”

“If the U.S. insists on escalating control measures, China will take necessary actions to resolutely protect the legitimate rights of Chinese enterprises,” he added.

How Could China Retaliate?

During the previous Trump-era trade war, China and the U.S. exchanged tit-for-tat blows in the form of tariffs, with China generally responding to each new levy in like.

But Biden’s more targeted strategy based on export restrictions didn’t initially prompt a reaction.

At the end of October, however, China made a move that could escalate into a full-blown supply chain war when it sanctioned the California-based drone manufacturer Skydio.

In a blog post  at the time, Skydio CEO Adam Bry said that although the company had already moved to reduce its reliance on Chinese goods, “batteries are one of the few components we have not yet moved out of China.”

As a result of the sanctions, he said the company would have to ration batteries “for the next few months” while it onboarded alternative suppliers.

China’s Supply Chain Leverage

With the Biden administration ramping up semiconductor sanctions and Trump likely to escalate things even further with tariffs, batteries could be one of China’s most powerful levers to retaliate.

Not only are over 80%  of the world’s lithium-ion batteries made in China, but the country is also a major supplier of the raw materials needed to produce them.

Aside from batteries and electronics, other areas where China could exert significant pressure on the U.S. include industrial chemicals and pharmaceutical ingredients, where specific, targeted sanctions like the one used against Skydio could significantly disrupt supply chains for American firms.

About the Author

James Morales

Although his background is in crypto and FinTech news, these days, James likes to roam across CCN’s editorial breadth, focusing mostly on digital technology. Having always been fascinated by the latest innovations, he uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.

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