China is still getting its hands on US chips — and striking back too

Former bitcoin miner Derek Aw, who helps Chinese firms access servers in Australia running on AI chips, told the Journal he often gets “asked if we have Nvidia’s chips.”

The US government is painfully aware of this practice. In January, the Commerce Department published a proposal to address the use of US cloud services by “foreign malicious actors” who could undermine national security by training powerful AI models. It’s all legal for now, though.

China has also stepped up restrictions of its own to hurt the West.

Last year, the country introduced curbs on the supply of key minerals needed in the chip industry, such as gallium and germanium. Given China is the world’s primary producer of these minerals, that has become a bit of a problem.

Feeling the pinch

A Financial Times report this week noted that China’s rules governing supply threatened to create shortages of the vital minerals and triggered price rises. The implications are being taken seriously.

Historian and economics commentator Adam Tooze wrote on X: “China is by far the most important supplier of Gallium that everyone needs for semiconductors. So, when Beijing slaps on controls, the world feels the pinch.”

Meanwhile, macroeconomist Philip Pilkington wrote that “Western semis will be slowly choked” in response to the impact of the mineral shortages.

Just how much pain this policy will cause in the West over the long term is still uncertain. But it’s clear China is not going to just sit back and watch as the West tries to lead the AI race.