US frets China will use supply chains and cyber sphere as additional weapon

KUALA LUMPUR (March 9): The United States is increasingly concerned that China will use its power in global supply chains as an additional weapon to advance its political and military might.

The “Annual Threat Assessment” (ATA) issued by the Director of National Intelligence on Wednesday (March 8) said that China is central to global supply chains in a range of technology sectors, including semiconductors, critical minerals, batteries, solar panels and pharmaceuticals.

China’s dominance in these markets could pose a significant risk to the US and Western manufacturing and consumer sectors, if the government of China was able to adeptly leverage its dominance for political or economic gain.

The ATA said China is leading the world in building new chip factories, with plans to build dozens of semiconductor factories by 2024, most of which will be dedicated to producing older, more mature technologies.

“While China only accounted for 11% of worldwide semiconductor fabrication capacity in 2019, it is forecasted to reach 18% in 2025.

“Because of the difficulties China is facing from export controls by Western nations, it is focusing on lower-capability, commodity chip technology, and China could become a powerhouse in that segment, which could eventually make some buyers more reliant on China,” it said.

Meanwhile, the ATA said China’s dominance in the mining and processing of several strategic materials, including rare earth elements, presents a major vulnerability to the United States.

It said China could use its control of these critical minerals markets to restrict quantities for commercial advantage, or as a tool in a political or trade dispute.

A prolonged disruption in supplies controlled by China would result in shortages that could affect output in civilian and defence manufacturing in the US and the West.

“However, restrictions on critical minerals exports probably would accelerate efforts and coordination worldwide to develop non-China-based alternative sources or substitutes.

“Some other areas of concern are the battery, pharmaceutical, and solar panel manufacturing sectors,” it said.

The report said that for example, China-based firms are on track to control 65% of the lithium-ion battery market by 2025, with the China dominant in all parts of the supply chain.

Cyber sphere

ATA said China probably currently represents the broadest, most active and persistent cyber espionage threat to the US government and private-sector networks.

China’s cyber pursuits and its industry’s export of related technologies increase the threats of aggressive cyber operations against the US homeland, suppression of the free flow of information in cyberspace — such as US web content — that Beijing views as threatening to the CCP’s hold on power, and the expansion of technology-driven authoritarianism globally.

ATA said that if Beijing feared a major conflict with the US is imminent, it almost certainly would consider undertaking aggressive cyber operations against US homeland critical infrastructure and military assets worldwide.

It said such a strike would be designed to deter US military action by impeding US decisionmaking, inducing societal panic, and interfering with the deployment of US forces.

“China almost certainly is capable of launching cyber attacks that could disrupt critical infrastructure services within the US, including against oil and gas pipelines, and rail systems,” it said.