What just happened? China has responded to increasing US sanctions on tech sales to the Asian nation by announcing export controls on some categories of graphite, a material used in electric vehicle batteries. It comes soon after Beijing introduced restrictions on the export of gallium and germanium, metals that are vital parts of the semiconductor, telecommunications, and electric vehicle industries.
China's Ministry of Commerce said in a statement that from December 1, three grades of graphite deemed highly sensitive will be subject to "dual-use item" export controls, a term that refers to applications including the military.
As with China's exports of gallium and germanium, companies will need to apply for a license to export graphite.
Graphite is the most common element used to create the anode side of lithium-ion batteries. As per Reuters, estimates say that global demand for the material, which was at 770,000 tons this year, is expected to triple by 2033.
China accounts for 64% of the global production of natural graphite and more than half of the artificial equivalent, and it refines 90% of the graphite into high-purity material used in EV batteries.
The commerce ministry said the restrictions, designed to "safeguard national security and interests," don't target any specific country or region, and that exports that comply with relevant regulations will be permitted.
Congrats Giga Shanghai on making millionth car! Total Teslas made now over 3M. pic.twitter.com/2Aee6slCuv
– Elon Musk (@elonmusk) August 14, 2022
"China used its last, strongest card for negotiation with the US, in terms of regulating the EV industry," James Lee, an analyst covering battery materials in Seoul at KB Securities Co, told Bloomberg. It's possible that Beijing's new export controls could see the US retaliate by restricting the use of Chinese batteries in EVs made by Tesla, which has a plant in Shanghai producing more than half the company's vehicles.
The tit-for-tat move follows the US government's decision to extend its ban on chip exports to China. Washington's new regulations remove restrictions on chip communication speeds, which had limited bidirectional transfer rates at 600 GB/s, prioritizing a computing performance threshold instead. It means that the A800 and H800, chips Nvidia designed specifically for the Chinese market that complied with the previous restrictions, and the RTX 4090 fall under the updated rules. Nvidia's gaming flagship has seen a slight uptick in price and less availability in the US since the new rules were announced, though the situation is expected to improve once the China ban comes into effect.
China said in July that the exporters of gallium and germanium, as well as their chemical compounds, would need to apply for licenses from the commerce ministry if they want to start or continue shipping them out of the country. China didn't sell any of the materials on international markets during August.