The U.S.-China truce continues: The battle to decouple semiconductor technology and raw materials is heating up

The Sino-US trade conflict has evolved from a simple tariff war to a deeper "decoupling race" in technology and minerals. In the face of U.S. export controls, China is actively promoting self-sufficiency in semiconductors, AI chips, EDA software, manufacturing equipment, and key materials. In contrast, the U.S. is focusing on the chip bill and the inflation reduction bill, uniting its allies to promote the "de-Sinicization" of the supply chain, and implementing de-risking in critical minerals and new energy fields such as rare earths, gallium, germanium, and graphite.

In the struggle between the two sides, the existing "truce" is just for each other to gain time to "win". The Morgan Stanley report also pointed out that technology and resource issues are becoming the new focus of the game between China and the United States. The United States has blocked the export of high-end chips and China has reversed controls on key minerals. The trade war between the two sides has long been out of the scope of supply chain friction.

China needs advanced chips and key equipment to be autonomous

The Chinese government is strengthening the policy of "strengthening the country through science and technology" and "self-reliance and self-reliance", and has specifically listed semiconductors and artificial intelligence as development priorities. The next five-year plan from 2026 to 2030 will "focus on advanced semiconductor technology, AI and basic research." To this end, the Chinese national team has formed a mature chip foundry with SMIC as the main force and a memory design team represented by Yangtze River Memory.

In addition, independent AI accelerators such as Huawei’s “Ascend” series of AI chips (such as Ascend 910) and Alibaba’s “Hanguang 800” are also continuously launched to make up for external dependence. However, these chips are still limited by manufacturing technology: SMIC currently only has a 7-nanometer process, which is still far behind TSMC and Samsung. Therefore, China has also invested heavily in its own equipment and components. Companies such as Tsinghua Unigroup and Yangtze Memory have received government support to develop high-end processes and 3D NAND technology.

At the same time, Beijing used its advantages in raw materials to counterattack. China has included gallium and germanium on its export control list; according to a report by the U.S. think tank CSIS, China controls 98% of the world's gallium supply. It has launched an export ban on materials required for such wafer processing, which directly threatens the U.S. communications and semiconductor industries. In addition, China has also ordered domestic companies to stop purchasing some American chips. Reuters reported that the Beijing Cyberspace Administration of China has asked Alibaba, ByteDance and other major Chinese manufacturers not to purchase NVIDIA's latest artificial intelligence products; Chinese regulatory authorities have even launched an antitrust investigation into Nvidia, accusing it of not complying with its previous commitments when acquiring Mellanox.

De-risking U.S. supply chains

In the eyes of the United States, China’s monopoly on raw materials in fields such as electric vehicles, wind power, mobile phones, and military industry poses national security concerns. In 2025, the United States will intensively promote the decoupling of the supply chain through tariffs and agreements with allies. The U.S. government intends to "ensure that the U.S. electric vehicle industry is decoupled from China," shifting the U.S.'s increasing reliance on China's battery and electric vehicle supply chains to domestic and friendly countries. In July 2025, the U.S. Department of Commerce plans to impose a 93.5% anti-dumping tax on Chinese graphite. This material accounts for more than 90% of the global negative electrode materials for electric vehicle batteries, and each battery uses 50 to 100 kilograms of graphite. This tariff measure is aimed at curbing China's monopoly on core battery materials and protecting the local supply chain, but it has also triggered warnings from the industry that it may increase the cost of electric vehicles.

In addition to imposing tariffs, the United States actively seeks allies to cooperate in building alternative supply networks. In October, leaders of the United States and Japan signed the "Rare Earth and Critical Minerals Supply Chain Security Framework Agreement," committing to jointly develop mineral resources and refining capabilities to reduce dependence on China. In the same month, the United States and Australia announced an $850 million cooperation plan, in which the United States and Australia would each invest $100 million to accelerate the development of lithium, rare earth and other projects and position key minerals as national security assets. The United States is also exploring cooperation with Malaysia, India and other countries to invest in lithium ore, cobalt ore and other raw materials for electric vehicles.

Overall, the U.S. policy adopts an attitude of "expanding friendly shore supply circles and isolating China." On the one hand, it has blacklisted some Chinese companies and implemented stricter export controls on Chinese technology; on the other hand, it has formed alliances with many countries to ensure the source of minerals. In the next few years, the United States may further impose new tariffs on Chinese electric vehicles and batteries, or raise import barriers to China's new energy products to promote the formation of local and allied supply chains.

Computing power and new energy supply chain reconstruction

Both China and the United States are actively seeking "decoupling." The core of China's strategy is to get rid of its technological dependence on the West and devote all its efforts to promote the independence of semiconductors and AI chips. Its greatest advantage lies in its mastery of mineral weapons; in contrast, the core of the United States' strategy is to get rid of its dependence on China's minerals and supply chains. The advantage of the United States lies in its powerful alliance system and legislative tools. It can establish rare earth supply chains with Japan and Australia through "friendly offshore outsourcing", and use the subsidy policies of the Inflation Reduction Act (IRA) (such as requiring 100% of battery parts to come from North America in 2027) and huge investments in the Chip Act (CHIPS Act) to forcibly "de-China" the semiconductor and electric vehicle supply chains.

Overall, it is difficult for both parties to fully achieve their goals in the short term, but each has advantages at different levels. China has real-time bargaining chips in "upstream minerals" and can put its opponents into shortages of raw materials at any time; while the United States has the power to formulate rules for "downstream markets" and dominate "technical alliances", and is trying to reshape a new supply chain that excludes China in the next few years through legislation and alliances.

But now it seems that the two sides made moves, tolerated each other, and even reached a short-term peace, just because the two sides were not sure of "win" in this competition, but needed more time to construct a key winning game under the situation that the other side still needed each other.