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Economic Times
10 hours ago
- Economic Times
Chinese state media calls U.S. a 'surveillance empire' over trackers in chip shipments
Synopsis China's state media criticizes the U.S. for allegedly embedding location trackers in chip shipments to monitor diversion, labeling it a surveillance tactic. This accusation follows U.S. restrictions on chip exports to China amid technological competition. China also expresses concerns about potential security risks in U.S. chips, reflecting escalating tensions over technology and security. Reuters Flags of China and U.S. are displayed on a printed circuit board with semiconductor chips, in this illustration picture taken February 17, 2023. BEIJING: The United States' practice of installing location trackers in chip shipments at risk of diversion to China reflects the "instincts of a surveillance empire," China's state-run media outlet Xinhua said in a commentary published on Friday. Reuters reported earlier this week that U.S. authorities had secretly placed location tracking devices in targeted shipments of advanced chips to detect diversions to China, which is under U.S. curbs for advanced chip exports. The Xinhua commentary, titled "America turns chip trade into a surveillance game," cited "reports" that Washington had embedded such trackers, accusing the United States of running "the world's most sprawling intelligence apparatus". The U.S. government has in the past few years tightened restrictions on the exports of advanced chips as well as related technology and equipments to China, as the two superpowers vie for technological dominance. The Chinese commentary follows longstanding accusations from Washington and its Western allies that China could use some exported products, from telecommunications equipment to vehicles, for surveillance, posing potential security risks. In 2022, the Biden administration banned the sale and import of new telecommunications equipment from several Chinese firms, including Huawei, citing national security concerns. In January, it intensified scrutiny by targeting China-made cars and trucks. In its commentary, Xinhua accused the U.S. government of seeing its trading partners as "rivals to be tripped up or taken down," adding that "if U.S. chips are seen as Trojan horses for surveillance, customers will look elsewhere." China's cyberspace watchdog last month said it had asked U.S. chipmaker Nvidia to explain whether its H20 chips had any backdoor security risks - a hidden method of bypassing normal authentication or security controls. Chinese authorities have also cautioned domestic tech firms over their use of H20 chips, Reuters recently reported.
Time of India
11 hours ago
- Time of India
Chinese state media calls U.S. a 'surveillance empire' over trackers in chip shipments
BEIJING: The United States' practice of installing location trackers in chip shipments at risk of diversion to China reflects the "instincts of a surveillance empire," China's state-run media outlet Xinhua said in a commentary published on Friday. Reuters reported earlier this week that U.S. authorities had secretly placed location tracking devices in targeted shipments of advanced chips to detect diversions to China, which is under U.S. curbs for advanced chip exports. The Xinhua commentary , titled "America turns chip trade into a surveillance game," cited "reports" that Washington had embedded such trackers, accusing the United States of running "the world's most sprawling intelligence apparatus". by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like The Fastest Way to Overcome Knee Pain and Swelling Wellnee Undo The U.S. government has in the past few years tightened restrictions on the exports of advanced chips as well as related technology and equipments to China, as the two superpowers vie for technological dominance. The Chinese commentary follows longstanding accusations from Washington and its Western allies that China could use some exported products, from telecommunications equipment to vehicles, for surveillance, posing potential security risks. Live Events In 2022, the Biden administration banned the sale and import of new telecommunications equipment from several Chinese firms, including Huawei, citing national security concerns. In January, it intensified scrutiny by targeting China-made cars and trucks. In its commentary, Xinhua accused the U.S. government of seeing its trading partners as "rivals to be tripped up or taken down," adding that "if U.S. chips are seen as Trojan horses for surveillance, customers will look elsewhere." China's cyberspace watchdog last month said it had asked U.S. chipmaker Nvidia to explain whether its H20 chips had any backdoor security risks - a hidden method of bypassing normal authentication or security controls. Chinese authorities have also cautioned domestic tech firms over their use of H20 chips, Reuters recently reported.
Hindustan Times
2 days ago
- Hindustan Times
China's power over rare earths is not as great as it seems
IT DOES NOT look like the epicentre of a geopolitical earthquake. JL MAG's headquarters in Ganzhou, in south-eastern China, features leafy streets, a running track and a football pitch. The factory blocks are painted a jaunty blue and white. The airy campus usually supplies China's BYD and America's Tesla, the world's two biggest manufacturers of electric cars, with magnets made from rare earths—obscure minerals with a big role in modern industry. Recently, however, China has restricted exports of JL MAG's wares and of rare earths more broadly, causing shortages that forced the idling of some factories and alarmed Western firms and governments. Rare earths, a group of 17 elements with unique magnetic, luminescent and electrical properties, are vital to modern economies. Refined into powdered oxides and sintered into magnets, they can be found in consumer appliances such as mobile phones, vacuum cleaners and stereo speakers. Their use in data centres, in the generators of wind turbines and in the motors of electric cars—and also in the robots that assemble such things—makes them essential to booming industries. They are important to the defence industry (for jet engines, guided missiles and night-vision goggles) and to health care (for lasers and scanners). As the world gets richer, greener and warier, demand for all these things is surging. Adamas Intelligence, a research firm, expects rare-earth consumption to more than double by 2035. Chart 1 Rare earths are rare only in the sense that they tend to be found in very low concentrations and are chemically difficult to isolate. Their production, in contrast, is highly concentrated (see chart 1), with Chinese firms accounting for 69% of the ore dug up, over 90% of the refined minerals produced and nearly all of the manufacture of rare-earth magnets. In April, after America slapped China with 54% tariffs, China began to restrict exports of seven rare earths. Lately some shipments have resumed, but the West remains anxious. Rare earths are a buzzword at intergovernmental summits. The Pentagon is investing in projects to mine them. Is the world hostage to China's near-monopoly and, if so, can it free itself? A rarefied industry China began mining rare earths in the 1950s. At first it trailed behind America, which had discovered rare-earth deposits in the 1940s as it searched for uranium to make atomic bombs. But in the 1980s China granted licensing authority to local governments even as it began welcoming foreign investment and encouraging exports. Landlocked provinces saw a chance to industrialise. Hundreds of mining firms sprang up. By the 2000s there was a rare-earth glut. America's main mine, Mountain Pass, had shut. Chinese producers were the last men standing, but even they were suffering: the industry was fragmented, illegal mining was rife and profits were scarce. To shore up the industry, China's government enlisted ministries, institutes and universities to foster research. Between 2000 and 2016 the Chinese Academy of Sciences produced 2,018 papers on rare earths. The authorities also encouraged consolidation in the industry, culminating last year in the formation of two giant firms. Northern Rare Earth, in inner Mongolia, extracts 'light' rare earths by digging. China Rare Earth (CRE), based in Ganzhou, cranks out the 'heavy' kind through leaching. The pair account for nearly all of China's rare-earth mining. The same firms also refine rare earths from the ores—an area in which China is even more dominant. As well as domestic feedstock, they have access to cheap ore from neighbouring Myanmar, where a bitter civil war has allowed a completely unregulated mining industry to flourish. Refining is a complicated business, requiring lots of electricity, solvents and reagents. Processing some ores involves more than 100 separate steps, the details of which are fiercely guarded secrets. These techniques are also tailored to the local geology, so are not easy to replicate. Experience breeds efficiency, allowing yields to rise and costs to fall. A patent filed in July aims to push the concentration of oxides extracted from Bayan Obo, a northern rare-earth mine that is the world's largest, past 60%, says Cory Combs of Trivium, a consultancy (40-50% is typical). The presence of all elements of the supply chain within China, be it producers of such inputs as machinery and chemicals or consumers of rare earths, such as manufacturers of magnets, generates more savings. All this makes China's domination of the industry hard to challenge. Although alternative suppliers are starting to master a few links in the chain, they 'are always missing something', says Wang Yue of Wood Mackenzie, a consultancy. The Chinese authorities are determined to keep it that way. In 2023 they restricted the export of equipment used to process rare earths. People with special expertise in the field are barred from travelling abroad. China's support for the rare-earths industry probably originally owed more to economic opportunism than to geopolitical calculations. 'I don't buy the argument that Beijing spent 50 years developing rare earths as a tool for conflicts that hadn't happened yet,' says Mr Combs. But, intentionally or not, rare earths have become a source of pride and clout. A staffer at JL MAG says Ganzhou's prowess 'has surpassed expectations'. A snack vendor agrees: 'Now everyone in the world recognises that our country is strong.' In another part of the city, the gates of Yueci Mag-Tech, which makes parts involving rare earths for aerospace and other industries, bear a bright-red sign: 'We will not waver as we forge ahead in the direction indicated by General Secretary Xi Jinping!' At the moment, Mr Xi seems to be steering China towards using rare earths as a means of economic coercion. At first glance, they seem well suited to the task. Their production does not depend on imports of raw materials, unlike other vital commodities that China produces the bulk of, such as copper and lithium. And the costs of curbing exports are strikingly asymmetrical: for a few tens of millions of dollars in forgone sales, whole foreign industries can be crippled. Raring for a fight The export controls China put in place on April 4th gave an indication of the pain it could inflict. The rare earths involved (and magnets using them) could no longer be exported without a special licence. The ostensible justification was to prevent military uses. In practice, all sorts of industrial supply chains snarled. Applications for export licences piled up and exports plunged. The scant stocks available outside China soared in price. Ford and Suzuki, among other carmakers, had to suspend production at some factories. Western executives and officials rushed to negotiate. Some companies agreed to disclose commercially sensitive information about how they used rare earths, including technical drawings, to secure the necessary export licences. Approvals, especially for magnets, began to accelerate in June. But exports remain low and inconsistent. German firms have received more magnet licences than American ones, for instance. Carmakers in India, which has strained relations with China, appear to be at the back of the queue. Even if exports revert to their previous levels, it could take months to replenish stocks. Moreover, many of the licences that have been issued are valid for only six months, after which buyers must reapply. And the rules may always change again. A refurbished bunker from the second world war at a confidential location in Frankfurt gives a sense of how precious rare earths have become—and how vulnerable the West remains to shortages. The bunker holds 300 tonnes of minerals amid brutalist-chic security. The walls are two metres thick; the door weighs 4.6 tonnes. For some rare-earth elements, the bunker holds 10% of the world's annual output. In one corner an Asian manufacturer maintains a stash worth nearly $10m. Another firm, from Europe, stores enough here to cover two years' worth of use. Yet most consumers have no buffers. The majority of the metal in the bunker is owned not by end-users but by Tradium, a metals merchant whose sister company, Metlock, runs the facility. Buyers who usually haggle over pennies per kilogram 'want material at any price', says Matthias Rüth, Tradium's founder. Western leaders consider the threat grave. Gracelin Baskaran of the Centre for Strategic and International Studies, a think-tank in Washington, DC, says 'a whole-of-government effort' is under way in America to reduce dependence on China. Mountain Pass, which resumed operations in 2018, produced 47,000 tonnes of light rare-earth oxides last year. It aims to reach 60,000 tonnes by 2030. America's Department of Defence has agreed to guarantee a minimum price for its output well above the level that prevailed before China curbed exports. In May Lynas, a firm backed by the American and Japanese governments, began producing heavy rare earths in Malaysia, making it the first commercial producer outside China. In June the European Union said it would back rare-earth projects in Malawi and South Africa. Hundreds more schemes are being mooted around the world. The problem is that most of these are years away from starting up, if they ever do. Project Blue, a consultancy, lists just 22 projects that hope to be up and running by 2030. Delays are frequent in mining and rare earths present particular difficulties. Chinese producers are so efficient it is hard to compete with them and the current export restrictions are so mercurial it is hard to know how long they will last. Financing big upfront investments in mines under such circumstances is tricky. But there are other options besides simply trying to replicate China's supply chain in the West. One possibility is recycling, which is currently negligible. After all, says Frédéric Carencotte, the founder of Caremag, a rare-earth startup, recycled magnets 'are the richest kind of ore we know'. The EU, which has no rare-earth mines of its own, is especially keen to foster a recycling industry. A law adopted last year aims to satisfy a quarter of the bloc's demand for critical minerals, including rare earths, through recycling by 2030. Next year Caremag, which has raised €216m ($253m) from private investors and the French government, hopes to begin producing recycled rare earths at a plant in Lacq, in southern France. It plans to recycle around 2,000 tonnes of magnets a year. The feedstock will include everything from big electric motors in cars to the tiny ones in hard drives. A good deal of it, says Mr Carencotte, will come from the swarf left over from manufacturing virgin magnets in the first place. In 2024 the firm signed a ten-year supply contract with Stellantis, a carmaker that owns the Chrysler and Fiat brands, among others (and whose biggest shareholder owns a stake in The Economist's parent company). Cyclic Materials, a startup based in Canada which has raised $84m from investors including Amazon, Hitachi and Microsoft, has similar ambitions. It is building two plants, one in America and another in Canada, which should between them produce 500 tonnes of recycled rare earths a year, including heavy ones. In May Cyclic inked a deal with Lime, an American firm that makes rentable e-bikes, to recycle the vehicles at the end of their lives. Besides rare earths, says Ahmed Ghahreman, its founder, it will also recover aluminium, steel and copper. Mr Gahreman hopes that will help the firm stay viable even if rare-earth prices tumble. Some companies may be able to slash their consumption of rare earths. The car industry provides possible examples. Most electric cars built today rely on permanent-magnet motors (PMMs), in which powerful rare-earth magnets are mounted on the rotor (the bit of the motor that moves), while electromagnets are mounted on the stator (the bit that doesn't). Electromagnets are coils of wire that generate a magnetic field when an electric current is passed through them. The interaction between the two magnetic fields makes the rotor spin and the wheels turn. PMMs are powerful, efficient and compact. But they are not the only way to turn electricity into motion. Tesla's early electric cars used induction motors. These eschew magnets on the rotor and rely instead on a phenomenon called electromagnetic induction to make it spin. Induction motors avoid rare earths, but are generally bigger. They can be more efficient in some circumstances, however. A few contemporary vehicles, such as Audi's Q6 e-tron, use induction motors alongside PMMs. Another option is to replace the permanent magnets on the rotor with a second set of electromagnets like the ones found on the stator. Such 'externally excited' motors (EEMs) are more complicated than permanent-magnet machines. The engineering tricks necessary to transfer electricity from the battery to the spinning rotor means they tend to be bigger, too. But, like induction machines, they can be built without any rare earths. Both BMW, a German carmaker, and Renault, a French one, sell cars powered by externally excited motors, and boast about their lack of reliance on rare earths in their ads. The technology is improving rapidly. ZF Friedrichshafen, a big German supplier to the car industry, has developed an EEM that is no bigger than an equivalent PMM. With no rare earths, the motor is cheaper too, says Otmar Scharrer, who runs electric-powertrain research for ZF. And the ability to control the magnetic field in the rotor precisely means it can sometimes be more efficient, especially at high speeds. Dr Scharrer says several carmakers are interested in ZF's new EEM. It hopes to start manufacturing at scale in 2028. 'Nearly all the big car companies at least have the option to build electric motors without using rare earths,' says James Edmondson of IdTechEx, a research firm. The question, he says, is whether they regard the current shortages as a short-term disruption that can be ridden out or a longer-term problem that will require changes to their business plans. Rareguard action That question—of how long the disruption might last, and how willing China might be to use rare earths as a weapon in future—will determine how quickly and resolutely firms and governments seek to insulate themselves from Chinese pressure. One the one hand, the woolliness and inconsistency of the current Chinese restrictions may blunt the incentives to adapt. On the other hand, this is not the first time China has weaponised rare earths. In 2010, amid a Sino-Japanese maritime dispute, China throttled exports of rare earths to Japan. Japanese manufacturers, with their lean, 'just in time' supply chains, were caught off guard. The Japanese government was forced to release the captain of a Chinese vessel it had detained, after which China allowed exports to resume. But the supply scare encouraged Japan to use less rare earths, produce more of them itself and build stockpiles. Although some of this caution has since dissipated (witness Suzuki's difficulties), Japan is still much less dependent on Chinese imports than it was 15 years ago. Furthermore, the West does not need to develop a home-grown substitute for the entire Chinese rare-earth industry to reduce the threat China's monopoly poses. That would be prohibitively expensive and would require open-ended subsidies. Instead, argues David Merriman of Project Blue, the West could 'significantly derisk' by cutting its reliance on China to 60-70% of consumption. That would provide sufficient alternative sources of supply for the most critical uses. Recycling, thrift and innovation could sort out the rest. And of course, the more aggressive China is about using its market power, the greater the incentive the rest of the world has to find ways round it. The only way China can preserve its monopoly in the long run is to keep rare earths both cheap and abundant.
