As South Korean electric vehicle battery makers brace for China’s export curb on graphite to take effect next month, analysts say Washington, Seoul and Tokyo should accelerate the launch of a pilot program aimed at boosting supply chain resilience.
Daniel Ikenson, director of trade, investment and innovation at the Asia Society Policy Institute, told VOA he thought the U.S., South Korea and Japan had already waited too long to establish a proposed supply chain early warning system (EWS).
The EWS “should have been expedited well before the United States even began contemplating restrictions on exports of semiconductor and other high-tech products to China,” Ikenson said.
Beijing’s latest curb on exports of a key raw material for EV batteries was announced by its Ministry of Commerce on October 20, three days after Washington announced restrictions on the sale to China of high-end semiconductors, including advanced AI chips from American chipmaker Nvidia.
The U.S. Commerce Department said the sales were blocked because China could use the chips to advance its military.
China previously restricted exports of gallium and germanium, which are used to manufacture semiconductors, on August 1.
“These new restrictions are clearly designed by China to signal that it can slow U.S. progress in the clean EV sector,” said Troy Stangarone, senior director at the Korea Economic Institute.
Washington, Seoul and Tokyo agreed at a Camp David summit in August that they would launch the pilot EWS to identify key items that are overly reliant on one country — including critical minerals and rechargeable batteries — and share information to minimize any supply chain disruptions.
The three countries also agreed to create “additional mechanisms” for fostering supply chain resilience through the Indo-Pacific Economic Framework for Prosperity (IPEF).
The Biden administration initiated the IPEF in May 2022. The cooperative framework is seen as an effort by 14 member states, including the U.S., South Korea and Japan, to counterbalance China’s economic influence in the region.
Regarding its export control, Chinese Embassy spokesperson Liu Pengyu said, "The Chinese government's normal adjustment of export control in accordance with law is not targeted at any specific country of region, nor at any specific incident."
He continued, "China has always been committed to ensuring the security and stability of the global industrial and supply chain and will grant permission to exports that comply with relevant regulations."
He added, "China is a builder of, contributor to, and defender of a stable and unimpeded global industrial and supply chain" and "ready to work with its global partners to uphold true multilateralism, maintain the stability of the global industrial and supply chains."
South Korean EV battery makers have been scrambling to stock up as much graphite as possible since Beijing announced the graphite curb. It is expected to reduce supplies worldwide as Beijing is requiring Chinese exporters to obtain permits starting in December.
'Wake-up call'
South Korea depends heavily on China for graphite for EV battery anodes, the negatively charged portion of the battery. Over 90% of South Korea’s graphite imports came from China between January and September of this year.
Han-koo Yeo, who served as South Korea’s trade minister from 2021 to 2022 and was an original participant in developing the IPEF, said the latest export curb by Beijing would be a “big wake-up call” to South Korea, Japan, the U.S. and a small group of countries that depend on China’s graphite.
At the same time, Yeo told VOA Korean in a telephone interview that the curb was a “perfect example” of why the pilot program should be expedited.
“The key point is how to respond in this kind of crisis moment” that has not yet evolved into a big disruption, but “it’s uncertain enough that the markets are nervous, and companies are worried,” said Yeo, currently a senior fellow at the Peterson Institute for International Economics.
He said South Korea, Japan and the U.S. should individually identify vulnerabilities in their supply chain networks and facilitate private-government collaboration needed to support a trilateral framework the three countries would set up.
Under the framework, Washington, Seoul and Tokyo should share information, find alternative sources to diversify away from dependence on a single country, and accelerate the development of new substitute technology, Yeo added.
He said each of the other 11 IPEF countries should do the same and cooperate under an IPEF framework.
After setting up the framework for supply chain resilience, “what is important is to put that into action,” he said.
New partnership
The State Department announced on Wednesday the Mineral Investment Network for Vital Energy Security and Transition, a new public-private partnership with SAFE’s Center for Critical Minerals Strategy, to boost investment in critical mineral supply chains.
SAFE is a nonpartisan organization that advocates for secure, resilient and sustainable energy solutions.
Also on Wednesday, the Biden administration called for a seventh round of negotiations for the IPEF in San Francisco November 5-12 ahead of an Asia-Pacific Economic Cooperation summit beginning November 14, according to the U.S. Trade Representative’s Office.
"The supply chain component of the Indo-Pacific Economic Framework is mostly completed, and its terms should be more widely understood after the APEC summit in San Francisco,” said the Asia Society’s Ikenson. “It will shed more light on what the leaders had in mind at Camp David.”
Ikenson added, “China will do what it can to exact a price for U.S. and allies’ export controls. But Beijing knows that if it presses too hard it will destroy their business in the longer run as Washington, Seoul and Tokyo and Brussels quadruple down on investment in mining and refining around the world.”
China’s export curb on graphite could accelerate the development and use of silicon to replace graphite as the key ingredient for making battery anodes, according to Gene Berdichevsky, co-founder and CEO of Sila Nanotechnologies, a company with headquarters in Alameda, California, and manufacturing in Moses Lake, Washington.
“The move by China highlights the vulnerabilities in the current supply chain and the need for alternatives,” Berdichevsky told VOA Korean. “There’s now a greater urgency to shift to silicon anodes, but it will be a gradual process shaped by advancements in battery technology, market signals and additional policy support.”
Berdichevsky added that the automakers are shifting quickly to silicon in their EV battery supply chains, motivated in part by the high performance of silicon anodes. Silicon-made anodes take less charging time.
Stangarone at the Korea Economic Institute said, “China needs to maintain market confidence to prevent companies from seeking alternative supplies. Otherwise, it would incentivize a quicker move from Chinese supplies.”