In Geopolitics Today: Friday, September 29th
China Boosts Semiconductor Subsidies, Nickel-Gold Alloys Set New Thermoelectric Efficiency Records, and other stories.
China Boosts Semiconductor Subsidies
China recently increased tax credits for domestic semiconductor R&D by 20% as it aims to reduce reliance on U.S. technology amid export controls. This adds to over $150 billion in Chinese chip subsidies in 2022 alone. However, China still lags far behind in semiconductors, contributing just 9% of global value-add despite 24% of demand. Key officials admit subsidies are too fragmented across local governments.
The new credits represent Beijing asserting more control over incentives to develop home-grown alternatives as US restrictions bite. China's semiconductor push highlights its adaptation under economic pressure. Success remains uncertain, but for Washington, Beijing's perception of progress matters. Tax policies that encourage domestic chip innovation, even using foreign tech, signal strategic focus on supply chain resilience. This fuels a subsidy arms race as China doubles down on sectors targeted by US export controls. The game of carrots and sticks continues as each side mobilizes resources toward competing tech visions.
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The United States Invests in Central Pacific Cable
The US is supporting a new undersea internet cable called the Central Pacific Cable that will connect American Samoa and Guam to 10 Pacific Island countries. Undersea cables that transmit nearly all transcontinental internet traffic have become a key battleground, and this cable promises to boost connectivity and development in Pacific economies while expanding US economic and strategic ties. The announcement highlights the growing strategic importance of undersea internet infrastructure.
As the US and China compete for influence, control over telecommunication networks is becoming a key priority. Undersea fibre optic cables carry 99% of international internet traffic, making them critical backbones of global communications. The cable project reflects how undersea links are increasingly viewed as geopolitical tools. It complements the East Micronesia Cable built by the US, Australia and Japan to limit Chinese control over Pacific telecom networks. As the US-China rivalry intensifies, technology infrastructure is no longer seen as merely commercial, but as a way to gain strategic advantage. Whether by enabling surveillance, cutting off adversaries, or binding allies, control over global communications is growing in importance.
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Western Firms Navigate Complex Path on China
Despite deteriorating US-China relations, Western companies remain invested in the Chinese market for revenue and growth. Though uncertain about China's economic trajectory, firms still send executives to high-profile forums there. While political tensions persist over Taiwan and human rights, businesses tend to prioritize economic ties. Even as supply chains shift, China's consumer base retains appeal. De-risking, not total decoupling, is the preferred corporate approach amid geopolitical frictions.
Within the EU, views on engaging China diverge based on economic interests and values. But with China's trade surplus rising, pragmatism is growing. Germany's latest strategy calls for frameworks to guide future China ties. Though aligning more with Washington's stance, Europe is hesitant to jeopardize trade. Each country balances competing priorities, trying to uphold EU positions while accommodating unique ties with Beijing. Western economic engagement with China endures but is growing more complex amid great power tensions.
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Nickel-Gold Alloys Set New Thermoelectric Efficiency Records
Researchers in Vienna have discovered nickel-gold alloys with record-high thermoelectric performance for efficiently converting heat into electricity. Unlike semiconductors normally used, these metallic alloys have very high electrical conductivity paired with a large Seebeck coefficient. This enables far more electrical power generation from the same temperature gradient.
The discovery highlights the potential of metallic alloys for thermoelectric materials, traditionally dominated by semiconductors. With further work to identify cheaper alternatives, efficient thermoelectric materials could provide game-changing capabilities for harvesting waste heat. Vast amounts of heat are lost across industries and devices. Leveraging metallic alloys to convert more of this untapped energy could boost sustainability and enable self-powered electronics. After long being an “out of sight” technology, more effective thermoelectric materials are poised to go mainstream.
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Angola Seizes Opportunity in Critical Minerals Market
Angola is showcasing its wealth of critical minerals, including chromium, cobalt, graphite, and lithium, as global demand surges. With 36 of the 51 most critical minerals, Angola aims to become a major supplier, like for electric vehicle batteries. Japan, the EU, and the US have all shown interest, including revamping Angola's railway infrastructure to transport minerals. Luanda sees an opportunity to diversify its economy beyond oil reliance.
Angola holds a key position in the emerging critical minerals market. Foreign powers are not only interested in tapping into Angola's mineral reserves, but also in revamping its railway infrastructure to facilitate the efficient transportation of these valuable resources. This interest underscores Angola's potential to diversify its economy beyond its traditional reliance on oil. However, realizing the full potential of Angola's mineral wealth is not without its challenges. The nation must address issues like corruption and remain cautious of developing an overdependence on resource extraction and export. To ensure that the profits from mineral extraction benefit the broader population and promote sustainable development, Angola needs effective governance and economic stewardship.
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US Implements Stringent Investment Restrictions
The United States has established a new mechanism to regulate certain US investments abroad, particularly targeting strategic technology sectors in China. The program prohibits investments in quantum, AI, and semiconductor technologies while requiring filings on others. This aims to curb US capital from aiding foreign military modernization. However, its broad scope raises compliance uncertainties for investors.
The open-ended rulemaking process demonstrates the complexity of restricting outbound investments. Ambiguous terms and indirect investment implications will likely need refinement. While motivated by technology competition with China, the program's longevity is assured given its basis in national security. The new screening regime highlights escalating efforts to control cross-border tech flows amid great power rivalry. Its evolution warrants monitoring even by unaffected parties.