The 20th century was dominated by oil. For the 21st century, it’s chips. Chips are the new oil. You cannot see them, but they’re everywhere—from your phones to your cars to microwaves. Chips are omnipresent, which makes them a $611 billion industry. Currently, two countries are battling to control it: the United States and China.
Washington Strikes First
On Monday, Washington drew first blood. It announced new sweeping restrictions. This crackdown includes curbing exports to 140 companies, tightening control of chip-making gear, and stopping the export of US and foreign-made HBM to China. HBM stands for high-bandwidth memory chips; they’re used in high-performing computing applications like artificial intelligence. The US has one simple goal: stop China from developing advanced AI tools. That’s what this new ban is about.
China’s Retaliation: Rare Metal Restrictions
Of course, China did not take it well. These actions severely disrupt the international economic and trade order, destabilize global supply chains, and harm the interests of both Chinese and US companies, as well as the worldwide semiconductor industry. We urge the United States to respect the law of the market economy and the principle of fair competition. If the US insists on escalating control measures, China will take necessary measures to protect the legitimate rights and interests of Chinese enterprises resolutely. Beijing talked about retaliation, and they walked the talk. On Wednesday, China banned the export of rare metals to the US. This includes gallium, germanium, and antimony.
Why Rare Metals Matter
Why are they important? Because you need these metals to make chips. Now look at the numbers: China controls 94% of the world’s gallium production—94%! It also controls 83% of germanium production.
So Beijing played to its strengths, curbing the export of these metals to the US. It’s a drastic escalation, but it’s not the first. This is the third crackdown in three years, and it may get worse in the months ahead because Donald Trump is set to take charge in Washington. He too has a hawkish stance on this issue.
Washington’s Two Worries: AI and Defense
Washington has two major worries at this point: one is advanced artificial intelligence tools. So far, the US has been leading the AI race, and it wants to keep it that way. It wants to maintain the lead. It cannot stop China from acquiring the know-how, so it is trying to derail the development process. The other worry is defense.
That’s what China wants. But for that, they need technology. And that has left the United States spooked, so they’re trying to restrict access. They’re trying to ensure that China gets nothing—neither the hardware nor the talent.
Beijing’s Small-Giant Strategy
Now, this is a setback for Beijing. Its chip production industry is new. They’re far behind the United States at this point. They need both technology and homegrown talent to beat Washington.
You see, the US has a few major chip giants—a few companies like Nvidia, AMD, and even Intel. China does not want that. It wants small chip and tech giants—and a lot of them. Currently, Beijing has 14,600 small privately-owned companies. Fourteen thousand six hundred companies are driving this industry.
Five thousand of them are working on new technology like AI. Ninety percent are manufacturing companies. Eighty percent operate in strategic industries like semiconductors and aerospace.
The Escalating Chip War
So it’s going to be Washington’s big companies versus Beijing’s mini-giants. And what’s next? Trump has already made his intention clear. He will escalate this further. As things stand today, the chip war is far from over. It is escalating—two superpowers, each with their strategy. The United States wielded its technological might, and China mobilized an army of small companies. It’s a battle that could well define the world in the years ahead. And it’s not just about chips.