The news China exported no gallium and germanium in August might seem like a drop in the ocean of international commerce, but poses profound implications for the United States and our technological future.

This comes at a time where the world is defined by global interdependency. A single decision made on the other side of the world can send ripples through economies and industries. Nowhere is this more evident than in the semiconductor sector. Hence the race to secure national interests and move away from any interdependency that plays a part.

China’s move to halt gallium and germanium exports comes amid mounting geopolitical tensions and rising concerns about a tech war between the world’s two economic giants. Gallium and germanium constitute essential components in semiconductor manufacturing, in turn crucial for everything we rely upon each day — from smartphones to the advanced technologies underpinning our national security.

This might not be a surprise given the massive CHIPS and Science Act enacted in the United States last year and trickle down of federal funds into industries over the next several years.

Regulating these exports underscores China’s determination to respond to U.S. export controls, even at the expense of economic growth.

A decision like this arrives at a risky time for China as the nation wrestles with weakening domestic demand and a housing crisis. Last month also marked the most significant drop in exports from China in more than three years, further diminishing prospects for its fragile economic recovery.

China’s export restrictions constitute a double-edged sword, as described by political analysts around the world, as it hinders its economy and expedites the shift of global supply chains away from Chinese dominance. While China leads in gallium and germanium production, alternative producers and substitutes are available to the global semiconductor industry, as highlighted by Eurasia Group analysts in a July research report.

Starting Aug. 1, exporters required special permission to ship gallium and germanium out of China. This move has intensified a technology war between China and the U.S., focusing on access to advanced chip-making technology, a battleground pivotal for innovation in smartphones,
self-driving cars and even weapons manufacturing.

What makes this development particularly intriguing is the broader context of China’s internal and external challenges, as highlighted by geopolitician Peter Zeihan. He sheds light on the struggles within China’s economy, political landscape and demographics, suggesting we’re witnessing a systematic breakdown that’s been brewing for years.

Many factors have already eroded China’s industrial competitiveness. A drop in birth rates signals a shrinking workforce and what could become a subsequent decline in consumer demand. Consider in addition the increase in labor costs over the past two decades, and China is a nation in distress.

China’s exposure to international sanctions and supply chain vulnerabilities grows as well. The geopolitical tensions in Ukraine and China’s limited energy and food supply routes put China at risk. In this tumultuous environment, the decision to halt gallium and germanium exports must be viewed as a manifestation of a broader crisis. The information vacuum, internal purges and demographic challenges are symptoms of a system under strain.

For the U.S., the challenge lies in adapting quickly to mitigate the potential fallout from China’s unraveling. Increasing domestic production, supporting small businesses and startups to aid innovation clustering and reducing reliance on Chinese-made components to nurture a robust semiconductor industry will be essential to weather the storm and come out strong on the other side. A transition won’t be seamless, and there’s a risk supply shortages will affect various industries in coming months.

As the world watches China’s complex issues unfold, it becomes clear the effects are extensive. The U.S. must prepare for a future in which technological self-reliance remains a priority. The semiconductor industry is at the forefront of this transformation. Decisions made in coming years will determine our nation’s technological sovereignty and secure our national interests.

The U.S. must safeguard the world’s technological future and seize the opportunity to lead in semiconductor innovation. Necessity is not only a mother of invention, but also could serve as the catalyst for a new era of technological prowess.