China heralds change in the semiconductor market: Increasing independence instead of US technology

China has made a clear, albeit not unexpected, announcement: the use of American chips is to be halted. Four major government-supported industry associations, representing a significant portion of Chinese semiconductor demand, have urged their member companies to reconsider purchasing American silicon. They pointed out that U.S. chips are 'no longer safe or reliable.' The associations' recommendation comes at a time of strained mutual actions between Beijing and Washington in the field of key technology. This complex interaction has revealed the intensifying competition and fueled the establishment of increasingly separate international supply chains. In a remarkably swift response, China banned the shipment of crucial minerals and metals to the U.S. just hours after U.S. officials announced new export controls aimed at limiting China's ability to produce advanced chips. In response, Beijing halted the export of gallium, germanium, antimony, and superhard materials, as well as graphite, to the U.S. This development signals China's new readiness to directly counter U.S. efforts to cut off access to advanced technology. China's actions against materials for semiconductor and military technology will be troublesome for the U.S. Department of Defense and American companies that are already seeking alternative suppliers to mitigate shortages in Beijing-controlled supply chains. China is the world leader in the supply of gallium and germanium. A complete export blockade of these materials could, according to a report by the U.S. Geological Survey, reduce the U.S. Gross Domestic Product by $3.4 billion. The increased endeavor to replace U.S. chips could affect a variety of American semiconductor companies. A European chip designer reports receiving inquiries from concerned Chinese customers wanting to ensure they were not an American company. 'For the first time, private companies are being asked to boycott U.S. chips,' he said. 'While it is not a direct order, it will have a deterrent effect.' Nevertheless, U.S. investors remain largely unfazed. Lin Qingyuan of Bernstein explains that there should be no worries in the near and mid-term future. 'If China were already able to do without U.S. chips, they would have done so.' The government is pushing forward with self-sufficiency efforts, even transitioning to foreign companies. For instance, the German automotive supplier Bosch recently showcased a 'localized chip solution' in Beijing. China's state grid proudly demonstrated electrical devices with Chinese processors. Analysts emphasize that it is too early to assess the impact of new U.S. controls on the Chinese chip industry. Chinese companies have made significant progress in replacing American tools, supporting the development of a more robust supply chain over the years.