Reflecting back, a pivotal and symbolic incident occurred on May 15, 2019. That’s when the then President Donald Trump issued an executive mandate prohibiting US companies from transacting with Chinese telecom firms, prominently Huawei Technologies. Less than a week later, an intriguing scenario unfolded with President Xi Jinping seen in a factory manufacturing rare-earth magnets. This signified how such elements can serve as China’s tactical tools equivalent to the USA’s sophisticated semiconductors.
Fast forward by six years, the underlying disagreements have only intensified. The foremost significant trade discord between the USA and China during Trump’s second term ended with Beijing leveraging its dominance over rare earths to push Washington into a deal. The magnetic materials derived from these rare earths are critical to an array of devices ranging from autonomous car seats to precision-guided missiles.
The imposition of preliminary tariffs by the US in April prompted China to restrict export permits, alarming US manufacturers about possible imminent closures. The repercussion of being excluded from the microprocessor sphere triggered a relentless effort by Beijing to close the technology gap. The state-controlled chip manufacturer, Semiconductor Manufacturing International Corp., has since mid-2019 invested billions in capital expenditures and research and development.
A year ago, the creation of a new semiconductor investment fund with a whopping $47.5 billion signaled China’s determination. Despite these endeavors, the US semiconductor stronghold remains largely unassailable, barring an unforeseen breakthrough. Huawei is reportedly in the process of developing an advanced 3-nanometer chip, capable of rivalling leading non-Chinese processors possibly by next year.
However, its top-tier design still lags by a generation compared to the US. An axiom of asymmetric warfare strategy suggests leveraging your adversary’s vulnerabilities rather than fighting head-on. This is where the role of rare earths becomes pivotal.
Technology clashes are akin to actual physical warfare. The US has thrived on lightweight, error-free processing power, which has considerably enhanced its military capabilities. Miniature, computer-guided cruise missiles with impeccable accuracy offer a stark contrast to deviating Soviet missiles.
Rare-earth magnets could spark a similar revolution in mechanical power by rendering motors smaller, more potent, cost-effective, and efficient. Anyone who has ever handled a modestly priced drone can readily perceive this leap in technology. Progressive technology and lithium-ion batteries have made the operation of such compact devices feasible.
The potential of this innovation is far-reaching with a significant influence on future warfare strategies. An illustration of this is Ukraine’s bold drone attack on Russia’s distant bomber fleet recently. Amidst the raging debate over transitioning to clean energy, America seems to be underestimating and underinvesting in bridging this technological gap.
The demand for rare earth magnets has so far been met at an insignificant cost. While China’s spending in the chip technology sector runs into hundreds of billions, the Pentagon, since the onset of 2020, has only spent $439 million in establishing a rare-earth supply chain through loans and grants.
The situation further worsens due to politics aligning with the fate of lithium-ion batteries. The imminent repeal of clean energy incentives proposed during the Biden administration and the subsequent collapse of the EV supply chain may result in a drastic cut in the production capacity of US battery manufacturers by 2030.
This could lead to a halt in the operations of almost every plant that has not yet begun construction, and render the US capable of producing only a meager number of batteries to cater to its annual car sales. Consequently, America’s dependency on China will increase, thereby leaving the US heavily reliant on them not only for car batteries but also for batteries used in other critical small-scale applications of lithium-ion technology.
The era of semiconductors saw the US intuitively understanding that its power lied in its commitment to stand at the forefront of technological innovation. However, when technological advancement is compromised due to ideological conflict, the fallout can be grave.
This is the path that the US currently seems to tread, by letting China take the lead in the development of rare earths, solar panels, lithium-ion batteries, and other advanced electrical technologies crucial for the future. Unforeseen consequences may arise should American forces find themselves on a future battlefield with a deficiency of necessary minerals and batteries to counter a blitz of drones.
Moreover, the absence of a coherent strategy to sustain the competitiveness in emerging technologies may not bode well for the future. Indeed, should a scenario occur where American soldiers have to face hordes of advanced tech drones with limited resources, the regret of neglecting future-oriented technology will be enormous.
America’s failure to invest strategically and diversify supply chains to ensure self-sufficiency could impede its ideal position in future battles. This points to the crucial need to revisit and recalibrate its technological and strategic policies, and to mobilize resources judiciously to remain competitive.
Essentially, the reluctance to embrace the future has raised serious concerns for the country’s technological prowess and national security. If left unchecked, lags in these areas could be catastrophic for the United States. It’s high-time for a policy re-evaluation for a better and secure tomorrow.
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