As South Korean electric vehicle battery manufacturers prepare to respond to China's restrictions on graphite exports that will take effect next month, analysts say that Washington, Seoul, and Tokyo should accelerate the launch of a pilot program aimed at improving supply chain resilience.
Daniel Ikenson, Director of Trade, Investment, and Innovation at the Asia Society Policy Institute, told VOA that he believes the United States, South Korea, and Japan have waited too long to establish the proposed supply chain early warning system (EWS).
Aikinson said that the warning system "should have accelerated before the United States began considering restricting exports of semiconductors and other high-tech products to China
On October 20th, the Beijing Ministry of Commerce announced the latest restrictions on the export of key raw materials for electric vehicle batteries. Three days before the announcement, Washington announced restrictions on the sale of high-end semiconductor products to China, including advanced artificial intelligence (AI) chips from American chip manufacturer Nvidia.
The US Department of Commerce stated that sales were prohibited because China could use these chips to advance its military development
China previously restricted the export of gallium and germanium used in semiconductor manufacturing on August 1st.
These new restrictions are clearly designed by China to indicate that they can slow down the progress of the United States in the field of clean electric vehicles, "said Troy Stangarone, senior director of the Korea Economic Research Institute (KEI).
Washington, Seoul, and Tokyo reached an agreement at the Camp David summit in August to launch a pilot supply chain warning system to identify critical projects that are overly reliant on a particular country, including critical minerals and rechargeable batteries, and to share information to minimize any supply chain disruptions.
The three countries also agreed to establish an "additional mechanism" to promote supply chain resilience through the Indo Pacific Prosperity Economic Framework (IPEF).
The Indo Pacific Prosperity Economic Framework was initiated by the Biden administration in May 2022. The cooperation framework is seen as an effort by 14 member countries, including the United States, South Korea, and Japan, to counter China's economic influence in the Indo Pacific region.
Voice of America contacted the Chinese Embassy in Washington to request a response to experts' call to accelerate the trilateral early warning system, but did not receive a response.
Since Beijing announced graphite restrictions, South Korean electric vehicle battery manufacturers have been stockpiling as much graphite as possible. Due to Beijing's requirement for Chinese exporters to obtain licenses starting from December, it is expected that global supply will decrease.
South Korea heavily relies on Chinese graphite to produce electric vehicle battery anodes. Between January and September this year, over 90% of South Korea's graphite imports came from China.
Han koo Yeo, who served as South Korea's Minister of Trade from 2021 to 2022, was the initial participant in formulating the framework for a prosperous Indo Pacific economy. He stated that Beijing's latest export restrictions will sound a "warning bell" for South Korea, Japan, the United States, and a small group of countries that rely on Chinese graphite.
Meanwhile, in a phone interview with the Korean language group on Voice of America, Lu Hangu stated that China's restrictive measures are a "perfect example" of why pilot projects should be accelerated.
The key lies in how to respond in such crisis moments, "which has not yet evolved into major destruction, but" the market is tense and businesses are worried, "said Lu Hangu, currently a senior researcher at the Peterson Institute for International Economics.
He said that South Korea, Japan, and the United States should respectively identify loopholes in their supply chain networks and promote cooperation between the private sector and the government to support the trilateral framework to be established by the three countries.
Lu Hangu added that under this framework, Washington, Seoul, and Tokyo should share information, find alternative sources, break away from dependence on a single country, and accelerate the development of new alternative technologies.
He said that all 11 other Indo Pacific countries with a prosperous economic framework should do so and cooperate under that framework.
After establishing a supply chain resilience framework, "it is important to put it into action," he said.
The US State Department announced on Wednesday the "Important Energy Security and Transformational Mineral Investment Network" (MINVEST), a new public-private partnership established with the non-profit organization SAFE's Center for Critical Minerals Strategy, aimed at promoting investment in key mineral supply chains.
According to the Office of the United States Trade Representative, also on Wednesday, the Biden administration called for the seventh round of negotiations on the Indo Pacific Prosperity Economic Framework to be held in San Francisco from November 5th to 12th, prior to the Asia Pacific Economic Cooperation (APEC) summit starting on November 14th.
The supply chain part of the Indo Pacific Prosperity Economic Framework has been basically completed, and its terms should be more widely understood after the APEC Summit in San Francisco, "said Aikinson of the Asia Association. This will more clearly illustrate the thoughts of the leaders of the three countries at Camp David.
Aikensen added, "China will do its best to make the United States and its allies pay the price through export controls. But Beijing knows that if the pressure is too strong, in the long run, as investments in global mining and refining in Washington, Seoul, Tokyo, and Brussels double, it will break China's calculations
Gene Berdichevsky, co founder and CEO of Sila Nanotechnologies, headquartered in Alameda, California and produced in Lake Mosey, Washington, said that China's export restrictions on graphite may accelerate the development and use of silicon to replace graphite as a key component in manufacturing battery anodes.
China's actions highlight the fragility of the current supply chain and the demand for substitutes, "Berdychevsky told the Korean language group on Voice of America. The urgency of turning to silicon anodes is greater now, but this will be a gradual process, influenced by factors such as advances in battery technology, market signals, and additional policy support
Berdychevsky added that automakers are rapidly shifting their supply chain for electric vehicle batteries towards silicon, partly due to the high performance of silicon anodes. Silicon anodes require less charging time.
China needs to maintain market confidence to prevent companies from seeking alternative supply. Otherwise, this will incentivize companies to get rid of China's supply more quickly, "said Stangron of the Korea Institute of Economic Research