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China hits back at Biden's chip restrictions by banning shipments of key materials to the US

3 December 2024 at 04:44
chip
Donald Trump has previously called China the "main threat" to the US AI industry.

iStock; Rebecca Zisser/BI

  • China's Ministry of Commerce said on Tuesday it will halt shipments of key materials to the US.
  • The ban includes materials that are used in semiconductors, batteries, and solar panels.
  • China's Ministry of Commerce said it was responding to fresh US chip export bans, announced Monday.

China has retaliated against the Biden administration's semiconductor export controls by banning shipments of key materials to the US, ramping up the global chip war ahead of Donald Trump's second term.

China's Ministry of Commerce said on Tuesday it would halt exports to the US of items relating to minerals and metals that can be used for both civilian and military purposes.

The so-called "dual-use" materials include gallium, germanium, antimony, and superhard materials. The announcement also included stricter export controls for items related to graphite, a highly conductive "wonder material." These materials are used to build semiconductors, batteries, advanced electronics, and solar panels.

China and the US have been locked in a technological race to the top over AI and military tech. Blocking the movement of materials essential to these industries is the latest tactic to be deployed.

The US is heavily dependent on China for gallium and antimony imports. While the US produces some germanium, China produces 98% of the world's supply, according to the US Geological Survey. The government agency published research in November that said losing access to germanium and gallium imports could add up to "billions of dollars in losses" across the US economy, with the fallout concentrated most in the semiconductor industry.

China's retaliation follows President Joe Biden's third wave of sanctions against US companies exporting materials to China's chip industry, announced on Monday. The ruling restricted US exports to 140 Chinese companies, including Huawei and Semiconductor Manufacturing International Corp.

"The US has broadened the concept of national security, politicizing and weaponizing trade and technology issues, and abused export control measures," China's commerce ministry said in a statement, adding that the measures are effective immediately and are being implemented to "safeguard national security."

On Sunday, Gina Raimondo, the US's commerce secretary, told reporters at Reuters, The New York Times, and others, that Biden's latest restrictions are "the strongest controls ever enacted by the US to degrade the People's Republic of China's ability to make the most advanced chips that they're using in their military modernization."

Trump has indicated that he'll continue to pressure China's tech industry. In Trump's first term in office, he placed up to 25% tariffs on Chinese goods. During his 2024 presidential campaign trail, Trump said he would bump that number up to 60% if necessary. And in a June interview with the social-media personality Logan Paul, Trump called China the "main threat" to the US AI industry.

The Department for Commerce did not immediately respond to a Business Insider request for comment, made outside normal business hours.

Read the original article on Business Insider

Critics said Musk 'overpaid' for Twitter. Thanks to Trump and xAI, it could actually be a steal.

Elon Musk standing in front of a US flag.
Elon Musk acquired Twitter at $44 billion, but investors have been writing down its paper value.

Samuel Corum/Getty Images

  • Elon Musk's $44 billion Twitter buyout was seen by many as overpriced.
  • However, the social media platform has helped give Musk close access to the Trump administration.
  • Twitter, now X, has also been a valuable data source for Musk's $50 billion startup xAI.

When Elon Musk bought Twitter for $44 billion, it was panned as one of the worst tech acquisitions in history. Two years, an election, and a generative AI boom later, it's starting to look like more of a bargain.

Shortly after the deal closed in October 2022, Wedbush Securities tech analyst Dan Ives said it would "go down as one of the most overpaid tech acquisitions in the history of M&A deals on the Street."

On paper, the $13 billion that Musk borrowed to buy Twitter, now X, has turned into the worst merger-finance deal for banks since the 2008 financial crisis.

Yet the deal has provided significant benefits for Musk. He now wields considerable influence in the incoming Trump administration after using X to throw his support behind the former president's reelection.

Not only has X served as Musk's political megaphone, but it's also been a lucrative source of training data for one of the billionaire's other ventures: xAI, the startup that's rocketed to a $50 billion valuation just 16 months after launch.

That fresh valuation means xAI has surpassed Musk's purchase price for X. It came with a $5 billion funding round, which The Wall Street Journal reported was backed byΒ the Qatar Investment Authority and Sequoia Capital.

Musk launched xAI in July 2023 as a springboard to get in the AI race after cofounding and then leaving ChatGPT maker OpenAI due to differences with its CEO, Sam Altman.

The startup has made up significant ground on its rivals by using X as a source of third-party data, one of the key avenues for training large language models.

In late 2023, Musk blocked other organizations from scraping X data for free β€” but gave xAI continued access. That gave xAI a crucial boost.

Ellen Keenan O'Malley, a senior associate at intellectual property law firm EIP, told Business Insider that xAI's access to "third-party information through X is the potential kryptonite to ChatGPT's edge" and a potential driver behind the rising valuation of Musk's startup.

Although the number of X users has been falling, it had 600 million monthly active users as of May, according to Musk.

"This is a level that neither OpenAI nor any other third party can access, or at least not as easily, which provides a huge competitive edge and therefore makes xAI a valuable company," added O'Malley.

Access to 0.3% of X's data costs around $500,000 annually, which prices many out, Wired previously reported.

"Clearly, X's or indeed any social media platform's data is valuable," Advika Jalan, head of research at MMC Ventures, told BI.

Elon Musk on X with Xai logo behind
xAI gets a boost from X data.

NurPhoto/Getty

X marks the spot in the Musk-Trump alliance

Musk spent at least $119 million on a political action committee to support Trump's campaign.

X played a large role, too. Musk has long been an avid poster on X, but he ramped up the volume during the election cycle. Analysis by The Economist found that the share of Musk's political posts on X has risen from less than 4% in 2016 to over 13% this year. Since endorsing Trump, has has posted more than 100 times on some days to his more than 200 million followers.

A study published by the Queensland University of Technology this month suggested that Musk may have tweaked X's algorithm to boost the reach of his and other Republican-leaning accounts.

Shmuel Chafets, cofounder of venture capital firm Target Global, told Business Insider that "X has become a powerful tool" in Musk's ecosystem, adding that it serves "as a platform for promotion and influence, similar to how Warren Buffett leverages the Berkshire Hathaway annual shareholders meeting and his shareholder letters."

X didn't always seem destined to attain such influence in Musk's hands.

In the months and years following Musk's takeover, an advertiser revolt ensued over content moderation concerns, the company laid off about 80% of staff, and service outages disrupted users.

Musk's co-investors have been writing down the value of their X stakes in the two years since. In September, Fidelity, one of its investors, slashed the value of its holding, giving X an implied valuation of $9.4 billion.

Yet Musk's support for Trump, which came after an assassination attempt against the president-elect at a rally in Pennsylvania in July, gives the tech billionaire political sway that is hard to put a price on.

Elon Musk and Donald Trump shake hands
Donald Trump and Elon Musk have big plans together.

Anna Moneymaker/Getty Images

Musk, who Trump said was a "super genius" in his victory speech at the Mar-a-Lago resort in Palm Beach, was selected by the president-elect to run a new Department of Government Efficiency alongside Vivek Ramaswamy, who ran in the 2024 Republican primary.

DOGE will be a "threat to bureaucracy," according to Musk, whose remit at the newly formed department will include driving $2 trillion in federal spending cuts and slashing regulations he deems superfluous and in the way of his corporate empire. As one SpaceX official told Reuters, Musk "sees the Trump administration as the vehicle for getting rid of as many regulations as he can, so he can do whatever he wants, as fast as he wants."

Since Trump's election win, the billionaire has been seen side-by-side with the president-elect at a UFC fight night while reportedly joining his calls to leaders like Volodymyr Zelensky and Google CEO Sundar Pichai.

X-odus

How long X maintains a Musk-Trump bromance and supports xAI's growth remains to be seen.

Musk, for instance, isn't always getting his preference for cabinet appointments chosen by Trump; his choice of Wall Street veteran Howard Lutnick as Treasury secretary was shunned for Trump's pick Scott Bessent, dismissed by Musk as a "business-as-usual choice."

X also faces legal challenges in which judges have expressed concerns over gatekeeping user data. In May, a federal judge in California dismissed a lawsuit filed by X against Israeli firm Bright Data. X claimed Bright Data was "using elaborate technical measures to evade X Corp.'s anti-scraping technology."

Earlier this month, X partially revived its suit against Bright Data. Should X be unsuccessful, it would raise questions about the value of the X to xAI data pipeline.

Elsewhere, the renewed interest in X rivals like Bluesky and Threads risks seeing Musk's social media site lose users who are both key for advertising revenue and providing vital sources of data for training future models at xAI. X is now in a position where "lots of people hate it because they see it as being a weaponized instrument of MAGA," Calum Chace, cofounder of AI startup Conscium, told BI.

For now, though, Musk has a powerful tool in his hands with X.

"Critics may enjoy pointing out his missteps, but Musk's ability to leverage X for both personal and business purposes reinforces his reputation as a visionary entrepreneur who consistently thinks several steps ahead of his contemporaries," said Target Global's Chafets.

"Ultimately, this deal could prove highly lucrative if he decides to sell or take the company public in the future."

Read the original article on Business Insider

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