Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
What do bans on critical mineral exports mean for innovators?
79 Plays3 months ago
Anthony, Mike, Alina, and Karthik convene to discuss China's recent ban on exports of gallium and germanium. They touch on the political outlook (pretty grim), the opportunity for new tech (pretty good), and the potential backlash from consumers (pretty likely).
Recommended
Transcript
Introduction: 2024's Mixed Bag
00:00:10
Speaker
Hello and welcome to Innovation Matters. It is the podcast about sustainable innovation brought to you by Lux Research. We have kind of a full house today here. I've got Alina, Mike Coleman, Kartik, and myself, Anthony, all in the virtual recording studio of, I guess we're recording this on December 6th, I should say, ah just a couple more weeks left in the year. 2024, I think has been,
00:00:38
Speaker
I don't know. To me, it's been a bad year. I guess I got married, so it's a bit of a mythbag there in that sense. um but the the the The marriage being the good part of the mix, right? not to to be Just to be clear.
00:00:53
Speaker
and Yeah, depending on which column you put everything in.
Kartik's Indian Wedding Adventure
00:00:56
Speaker
The marriage, the election of Donald Trump, um you know the collapse of climate talks or whatever. The plastics policy. Plastics policy or lack thereof. We got some good plastics policy in Europe this year. um Maybe that was the highlight of the year for me. I don't know.
00:01:11
Speaker
but um right up Right up there with a marriage. Right up there with a marriage, for sure. I don't know. um yeah how's How's everyone doing? We have some news to talk about. It's been an an insanely news-packed week. We're going to go through all the hits. But ive how's everyone doing? Karthik, you're back from India? How are you?
00:01:36
Speaker
Yeah. Um, I'm feeling great. Actually good to be back. It was my cousin's wedding. I was the best man. So, uh, not a lot of sleeping and chilling was a lot of running around, taking care of the wedding festivities and the guests, but yeah and it was fun.
TikTok Ban and Geopolitical Impact
00:01:51
Speaker
Yeah, it was just like, ah yeah, it was great.
00:01:54
Speaker
Classic, traditional, multi-day affair style of a wedding. That's mostly in the northern part of India. Our weddings are more subtle, only a few days. Only two days. Yeah, which is, you know, considering other Indian events much, much, much quicker.
00:02:14
Speaker
maybe But it was still fun. It was definitely fun. Good to be back. Unfortunately, we couldn't record any videos on TikTok because we are afraid all those videos are going to be taken away when TikTok gets banned. TikTok potentially banned in the US now too. um Mike, I don't know if you heard a judge just today upheld the ruling on the TikTok ban. So they have until January 19th. to sell off TikTok by Dance Does, which I don't think is going to happen, especially because I think Donald Trump is not going to in enforce the TikTok damnmp ban in any particular way. Yeah, speaking of TikTok, yeah played apparently it played a big role in the recent presidential elections in Romania. So right now I'm like holding my breath to see what's happening.
00:03:07
Speaker
This weekend is supposed to be the second scrutiny. We don't know if and it's still going to hold. But yeah. Yeah, I mean, just another insane thing happening in the world this week. um But maybe we're going to talk about something that's slightly more normal than the coup... More positive. Martial law in Korea or whatever. I wouldn't say it's more positive, but I guess it's more positive.
00:03:35
Speaker
and microose um But we wanted to we wanted to talk about the recent ban from China on exports of gallium and germanium.
China's Mineral Export Ban
00:03:49
Speaker
These are two fairly critical minerals. They're they're they're pretty niche minerals or metals excuse me in in the broad spectrum. um But they're used in a lot of electronics, right semiconductor manufacturing.
00:04:03
Speaker
ah For doping, I believe, um and and I believe a gallium is used as a substrate as well. Maybe I'm wrong about that in certain specs of the electronics. Yeah. I mean, that actually, the the main use for gallium in the US is gallium arsenide wafers that are used in LEDs. I think not too many LEDs being manufactured in the US. In the US, it's it's used for more high performance electronics, like high bandwidth memory and things like that.
00:04:31
Speaker
They're also ah for dual use, right? So it's commercial and defense purposes. Yeah, and I think that's certainly part of the story here. I mean, I think another part of it is just um this is a retaliatory move, right? You know, Joe Biden has really um been in lockstep with the 2016 Trump sort of policy of ratcheting up trade tensions with China, with a particular focus on chips, of course, through the Chips and Science Act, as well as green ah climate technologies, right, through the Inflation Reduction Act. You know, whether that's directly just sort of giving subsidies to domestic production, or in the, you know, the Chips Act really aggressively
00:05:19
Speaker
attempting to leverage US export controls and US dollar dominance to prevent China from getting access to to high end chips.
US-China Trade Tensions and Semiconductors
00:05:27
Speaker
And I think on Monday this week, there was another round of of chip controls. High bandwidth memory chips were put under additional additional sanctions by the Biden administration. And so to China responded with this. I think it's also to prevent the use of ah semiconductors for AI applications in military specifically, I think.
00:05:49
Speaker
in China, ah which is what prompted China to do this, if I'm not mistaken. Yeah, I mean, the the general strategic rationale ah behind these export restrictions is is to keep China from catching up with the US in AI. I think it would be fair to say. um And the military applications are one key reason that the US does not want China to catch up with it in AI.
00:06:17
Speaker
um And that I think is the the reason that gets emphasized when these sort of things, these policies are being announced in the US. But I think the the economic impact and the economic competition ah potentially between Chinese AI ah technology developers and and those in the US is definitely ah behind the scenes maybe a little bit more, but I think that's certainly part of the thinking too.
00:06:41
Speaker
Yeah. And let's not forget that China actually controls about 70% of the global production and processing of this rare earth. More probably. It's probably 80 to up to 90%. Yeah. But this this dominance gives Beijing such a significant leverage in the ongoing tech war, supply chain war with the US. And this has economic strategic geopolitical implications in the short and the long term.
00:07:11
Speaker
So it is it is important. And we might not even be able to see the whole implications right now. Yeah. Yeah. And it it's um I think the figure is 98% for gallium, actually. um And it's ah a little bit unclear what the what the impact of that will be. I mean, there there actually were Uh, there have been export restrictions in place already for a couple of years now, um, from, uh, for exporting gallium and germanium from, uh, from China.
00:07:47
Speaker
And other minerals, so ah antimony is another one. So actually one of the other things that happened this week as a result of this is Hankel actually declared force majeure because it wasn't going to be able, because of this policy, to deliver on some of its lubricant products to automakers that that use antimony. So that's that's a part of the story here as well. But I think gallium is one of the most significant um a materials impacted here. and it's it's i've I've been been doing some some some research on this. It's a little bit hard to say exactly um how to play out. The US doesn't import a lot of gallium from China or from anywhere else as gallium metal. um It imports a lot of gallium arsenide wafers.
00:08:40
Speaker
um And some of those wafers are made in China, though though the the wafer imports of gallium arsenide from China were were were pretty minimal even even before this announcement. It gets a lot of them from Japan and Europe. um As far as I could tell, these restrictions would not currently impede the ability of you know China to export galleon, raw orders of refined gallium to Europe and where a European company could use it to make a very you know high, high purity gallium arsenide wafer and sell that wafer to the US, which is is more or less what the supply chain looks like now as far as I can tell.
00:09:24
Speaker
um and so It's not quite clear how how exactly how disruptive or ah versus maybe a little more symbolic this So this action will be right now. I think they are trying to make it a bit more meaty. They just announced like literally as we're recording this or like an hour ago, they announced that they are trying to move you know similar to the way that the US export restrictions work by you can't, it effectively
Recycling: A Solution to Mineral Supply?
00:09:53
Speaker
applies to everyone. At least the US wants it to apply to everyone. You can't just buy them in another country and then turn around and sell these things to China.
00:09:59
Speaker
the Chinese you know have said announced that um they're basically trying to implement a similar policy banning the resale or reuse of these materials you know through other countries. And I think um they pretty um it's pretty clear that turning it into chips and then just selling them to the US is not what they want as an outcome. so I think you can expect them to be a bit more stringent, or at least attempt to you know put a bit more fear into people as opposed to just saying, like retaliating on paper and then letting it slide mostly. I think you can expect a bit more meat on the bone here of this of this export restriction. right
00:10:45
Speaker
Okay, I'm wondering if there's any alternatives any promising synthetic or substitute materials on the horizon. So we're like how feasible is recycling rare earth from like But recycling them for all the electronics. That is actually not a bad idea. Recycling is definitely something that has ah a decent amount of potential. The basic problem is that unlike a polymer or an organic material, it's quite difficult to synthesize an alternative, right? If your gallium arsenide chip is what you need, you'd need gallium and arsenide. You need those two elements to make it work, right? um But there are alternative sources.
00:11:24
Speaker
I mean, I think one thing is just the reason why we ramped down production in the West is just because it wasn't cost effective. like yeah yeah The impact of this has been to um
00:11:41
Speaker
raise the prices a lot. I think the prices are up 80 to 100% since the export restrictions really kicked off earlier in the year. So like, you know, we just like gallium and arsenic and all these are not arsenic, me um germanium, exists outside of China. We just have chosen not to refine them because it was cheaper to buy them. um We'll just start refining. That's one thing. Yeah, that takes time
Alternatives to Rare-Earth Materials
00:12:08
Speaker
though. Right. And the problem is a supply crunch.
00:12:12
Speaker
Recycling is definitely a potentially quicker option. I think you can scale that a bit more easily. But I think people are a little... It's always harder to actually recycle stuff than people think. like I see this a lot in batteries where it's like 95% of the minerals in batteries are recyclable. it's like are you know like Batteries are like super sustainable. and it's like
00:12:34
Speaker
you actually have to put in a lot of effort to get those 95% of minerals or whatever. They don't just fall out at the end of the day. Batteries is its own sort of scenario too because volume of batteries that is being produced is increasing so rapidly due to increased demand from electric vehicles that the amount of battery material that is available for recycling based on the number of EV batteries that were sold 10 years ago, essentially, right is just so much smaller than what's actually needed to produce the the amount of batteries we we need today. And to some degree, a similar thing is to is true with um you know with gallium or some of these other ah materials for advanced electronics. So recycling is definitely a good idea, but it's it's far from a far from a full solution to the problem and in the foreseeable future.
00:13:29
Speaker
Yeah, and consumers are already skeptical about recycling. Yeah, I'm not sure if recycling would make sense for defense applications and such, because if you look at things like gallium arsenide that's used for, you know, space solar applications, you need high purity gallium, high purity arsenic. And we have seen that if you're recycling, you know, used gallium arsenide solar panels, and even general solar panels, for example, the quality of the recycling is not good enough to be used again.
00:13:55
Speaker
in this application. So you're going to offset some of the demand needed for pure gallium and arsenic, maybe in other applications, but not for this one. So you will still need high purity from somewhere else. um I think you can only get that with virgin materials. so I don't think recycling is the solution even long term, even if you have the volumes to make it economically viable. That's interesting. But what about advancements, like scientific advancements in nanotechnology or material science could that reduce dependence on rare earth? It's tough, right? So I think there's a a lot of these materials I would say are used in pretty performance sensitive and price sensitive applications, right? When you're talking about military, when you're talking about some of these high performance RF applications, right? The the threshold um for
00:14:54
Speaker
shifting to an alternative material is really, really high because it changes everything and imposes big costs, but mostly it just doesn't really work as well. right The thing really works with the certain materials. right So it's quite quite difficult to change, and also people have been trying to develop alternative semiconductor materials for a long time, right? It's not just like they're starting today. So actually getting to something that's a solution requires something really transformative, either in terms of like
00:15:30
Speaker
ah complete system redesign and it may not even be possible there or a big breakthrough that hasn't happened yet and there's just a lot of opportunity or a lot of costs to absorb like if you're a military contractor and you need these chips to make your thing work you can double the price you're paying for the chips probably depending on what they are right the real risk is that there's no alternative and the supply chain breaks down. right And this is what happened with the automotive chips in the pandemic. right ah There was this shortage of not even high-end chips, but low-end chips, like really cheap chips for stuff like the the clocks that go in the cars and all the little sensors and bits and bobs.
00:16:12
Speaker
and They had the money to pay for more expensive chips, right but there were just no chips available. And that was because there was so production constraints. But here, you could see those same type of constraints emerge with with you know with the materials, but it's just like shifting that whole chip supply ecosystem to a new
Developing Domestic Refining Capacity
00:16:33
Speaker
material. It's just such a monumental task that it's probably a lot easier just to develop domestic sources of these metals, in my view, I guess. Mike, I'm curious if you have a different view. Yeah, I think in the case of gallium, that's definitely the case, especially because gallium, it's not actually particularly rare. It's a byproduct of zinc smelting. and you can you know if If you want to ramp up the refining capacity, that's it's not so much of a
00:16:57
Speaker
ah you know That takes time and it's difficult and all that, but it's not so much of an issue. and It's probably more realistic and and more near term, even if not perfectly near term, but more near term than kind of waiting for some of these alternative materials, which are out there like diamond and aluminum nitride and things are being ah explored for kind of next generation semiconductor materials, but those are still pretty far away.
00:17:24
Speaker
Um, so I think that's, that's going to to have to be the answer in the, um, kind of the near term for a lot of these materials. But I think the bigger picture, get the materials from Mike, like if China's not going to get us, um, get the U S gallium. I mean, the gallium is not and in, in, in the gallium is not in China. It's the gallium refining capacity that's in China.
00:17:51
Speaker
Right. China doesn't have you know uniquely high reserves of gallium. There's plenty of gallium and you know in rocks in the US and other place you know it's in It's in bauxite. It's in some of these zinc cores. You just have to invest in the capacity to to to refine it out. So who else can do the refining instead of China in the near term if they have to get it?
00:18:13
Speaker
There's a couple specialist refiners in the US and a couple specialist refiners globally, but they're quite small. like They really can't do the volumes that China can, and that's the challenge.
00:18:27
Speaker
Yeah, so Transfigura has a smelter in Tennessee that they they think they could adapt to produce, it'd be $150 million. dollars They said a couple of years ago, we can invest $150 million dollars in this and that would allow us to meet 80% of the US demand for actually both gallium and germanium.
00:18:49
Speaker
um which which tend to be found in some of these in this in the same sort of ores. So I think that's the sort of thing you're likely to see you're likely to see happen here.
Environmental Impact of Refining
00:19:01
Speaker
But it could be very still be very disruptive in the near term, because that's not going to you know that facility is not going to come online next year, even if they make the decision right now. You can also- Go ahead. You go ahead. <unk> like ah will I will go ahead. Yeah.
00:19:19
Speaker
ah um Yeah, so I think from a technology perspective, this definitely does i mean this is definitely bullish on metals extraction technologies right and metal refining technologies. you know the The big challenge, one of the big reasons why there's a lot of this processing in China is because it tends to be quite um quite environmentally damaging. right You need to use often acid leaching techniques, maybe high temperature acid roasting techniques, depends a lot on the and the metal you're talking about. But there's a reason why all the lithium refining, gold refining, gallium and germanium refining
00:20:03
Speaker
all that is in China, it's because you know there the opportunity to do it cheaper was in part due to some of the laxer environmental controls there and the fact that you could set these things up and you wouldn't get the the kind of pushback you would in the US, s right?
00:20:19
Speaker
And what that means is that these a lot of new technologies, especially things like electrochemical refining, right which we see in lithium extraction most predominantly, but is's definitely we're seeing other developments emerge. That is a great opportunity for the US, not just to lower the costs and scale these things up more quickly, theoretically, but also just to give you the license to operate.
00:20:40
Speaker
um There's also biological techniques. I mean, we've talked to companies who are using enzymes to ah break down and refine some of these orders.
US Political Support for Mineral Supply
00:20:48
Speaker
I think the big challenge right now in the US is that our tech development ecosystem is extremely lithium-centric. I don't know that... you know We've talked to a lot of companies in this space that are focusing on lithium, a couple looking at gold, but no startup that at least I'm aware of, or at least that we've talked to as far as I'm aware.
00:21:09
Speaker
is doing you know gallium or germanium refining. In part because the ah prices were pretty low a year ago and it wouldn't have made a lot of sense. right so There's definitely a technology development opportunity here, but you know we might need to see these companies pivot some of their approaches from lithium and gold to these more niche metals. I was wondering if If there would be the move towards domestic production, would that be likely to follow stricter environmental and labor standards compared to it being done in China or are the international suppliers, since you touched upon that? Or is that just wishful thinking? No, i think I think it will be done with the tighter set of standards, for sure. um I think that a big part of it is just that new build. A lot of the most environmentally, like
00:22:02
Speaker
China is not actually building a lot of new environmentally damaging stuff today. Like environmental restrictions have tightened a lot on a lot of different things in China. Air quality, chemicals, waste, right? But there is this legacy of industrial development from the 80s through the mid 2010s, right? um That creates these risk factors. So any new build today is gonna be probably built at a higher standard, even in China. But definitely I think in the US you'll have a higher environmental standard. And also, I think a lot of the point with these electrochemical or these less damaging approaches is not just that they're less damaging, but that they're easier to scale. right You can build them and operate them at smaller scales. You can operate them in smaller facilities. They're electrified, which can be good from an energy cost perspective. There's other advantages there. right
00:22:57
Speaker
And they're pretty well supported still by the DOE. And one thing that we do see is that the Trump administration, if you look at Project 2025, One of the areas that they're very aligned with the Biden administration on is critical mineral supply in general. And I mean, domestic industry, obviously every American politician wants jobs in America, but specifically critical minerals.
Global Supply Chain Shifts
00:23:20
Speaker
And so, you know, you can expect a lot of the incentives and funding and programs that have been started under the Biden administration through the DOE.
00:23:31
Speaker
to probably continue in the Trump administration, at least when it comes to stuff like ah critical minerals extraction, especially for these dual use national security items. Those are going to be top of mind of the Trump administration coming in. So we should expect to see you know continued support, strong support here for these things going forward. wanted to ask you on the on the topic of Trump, because with Trump coming in, and the expectation is that we are gonna see stricter regulations in terms of imports and tariffs for things from China. Do we see this export ban from China being translated to other semiconductors and minerals? And how do you think that's gonna impact the US overall? Because already the supply chain is so centralized.
00:24:19
Speaker
that the the bottleneck this is gonna create is gonna be severe, right? Yeah, definitely. I mean, I think, you know, they've already talking about and maybe have implemented graphite bands or graphite restrictions.
00:24:32
Speaker
Yeah. That's a part of this, this new announcement is a graphite, not, not, not as fully banned as, as germanium is, but subject to much more strict review. And that's obviously huge for batteries. Yeah. It's pretty clear. They're coming after the whole high tech supply chain, I think with these, with these announcements. Yeah. Yeah. I mean, just think big picture, right? Companies are going to need to start thinking differently about about supply chains and differently about which technologies they develop. right We're moving towards this, you know what we've called ah and a fragmented world scenario, right where the um you know you can't necessarily expect to have as high a um you know free trade and in all of a lot of these these sort of critical minerals, which is going to to actually shift the technologies that
00:25:27
Speaker
um the companies need to to think about deploying. and you know So in batteries, you know if lithium gets too restricted, maybe you have to think in certain yeah you know in certain geographies, maybe you have to think about sodium ion batteries. I think there is going to be a whole set of energy technologies that get more or less um advantaged by buy this shift.
00:25:54
Speaker
in addition to the advantage or disadvantage by it if there are going to be these restrictions on on on trade in these minerals. you know In addition to obviously the investments we've been talking about and new capacity and new techniques and and and recycling and all of that, um I think you're just going to see certain technologies just don't get deployed as much in certain geographies.
00:26:20
Speaker
um as as a result of this. And I think some stuff like gallium, I think we're going to solve that with with be able to solve that with domestic supply, at least in the in the longer run. But with with with certain other technologies, you know things like you know rare earths, which really are heavily concentrated in China, there is going to be a need for for more alternatives to to those.
00:26:47
Speaker
in in a lot of energy-related applications, catalysis and and so on. I just wanted to say that this has a lot of implications for consumers, even if consumers are not really paying much attention to this ban right now because for the majority it might seem like something coming straight from a sci-fi movie.
Consumer Impact: Prices and Shortages
00:27:12
Speaker
I think that in the In the short and long term, we will see higher prices. We will see product availability issues, quality issues. The automotive industry will be affected like both electric vehicles, but also gas powered vehicles, because my understanding is that rare earths are used in catalytic converters for traditional cars. So soon enough, we will have extensive consumer conversation on this.
00:27:45
Speaker
Yeah, it seems likely. um And I think one of the interesting things is to see how this ties into like support for things like tariffs, right?
00:27:58
Speaker
um You know, I think a lot of folks, myself included, are predicting that there will definitely be tariffs. um I'm more of a tariff maximalist than Mike in the sense that i think i I think Trump will put in some pretty strong tariffs and negotiate later. And I think the question is like, if that causes a lot of economic damage or some amount of economic damage, higher prices, you name it, what then, how are these issues of like,
00:28:29
Speaker
you know, a like China is restricting access to these, these critical minerals we need. Will that type of narrative increase support for tariffs? Like, Hey, we need to like fight back against this, right? You know, will that be perceived as like negatively like, Oh, like there's like a,
00:28:47
Speaker
you know like During the pandemic, there was a shortage of used car prices went way up right because there was like a shortage of production vehicles and like people were mad about that. you know Will that type of supply chain disruption result in further consumer anger and maybe be anger that's directed against the tariffs, which are perceived as being escalatory with China? I think there's a lot of ways this can unfold.
00:29:09
Speaker
I mean, it's complicated by the fact that like we're in a very low information environment for consumers right now, which is maybe the kindest the kindest way I can phrase that. um But yeah, I think it will definitely become part of the story. um But exactly how will be perceived is tough to say. Yeah. And it's not just electric vehicles, but they this The rarest minerals are powering everything from yeah smartphones, yes computers, smart home devices, yes and ah gaming consoles. That's going to be a big pain point for consumers. if they can't we're going to have gamers I have still not crossed my trauma. yeah I have still not crossed my trauma of my PlayStation 5, so please don't bring back those companies. Do you have a PlayStation 5? I guess you're playing FIFA on it or whatever.
00:30:01
Speaker
Yeah, FIFA, formula one.
00:30:05
Speaker
I do play FIFA. Yes, you're right. Yeah. What's, what's the top PlayStation cricket game? It's called cricket 24, but the game sucks. Honestly, that's, that's too bad. But, uh, I mean, yeah, that's, that's, that's cricket 07 used to be the OG game. Cricket 07. Wow.
00:30:29
Speaker
but I mean, that's the that's the the line, I think, ultimately, that both Biden and now Trump and the Chinese leadership is is going to be to be walking here. right They see these strategic priorities around you know restricting these restricting exports,
00:30:50
Speaker
raising tariffs, and so on. But how much you know we know that if those those things start to lead to economic pain, higher prices, shortages, et cetera, for consumers, there is going to be a political backlash to that. And China, right, I mean, a lot of the the legits on on the flip side, right, if they they keep escalating, there's you know a lot of the current prosperity of of ah of Chinese people is due to the strong export industries that they
00:31:22
Speaker
they have there. That's a lot of jobs and and ah you know economic support that's dependent upon that. And if that gets harmed too much, that is going to cause similarly political problems and in in China. um So that's also why I'm a a little more skeptical of this. I think that that there will be both, ah you know, on both sides are going to be pushing for for their own reasons to escalate the this war, but ah this this sort of trade war. But I think there's also going to be reasons for them to to do so a little bit more incrementally and maybe to find some opportunities to find some places ah where they can to
00:32:07
Speaker
to step back from, from the brink of it, because, uh, ultimately if it ends up hurting customers ends up hurting people's ah consumers and, or if it ends up hurting people's jobs, that that's going to be a big political challenge on, on either side.
00:32:24
Speaker
yeah But at the negotiating table, I think that the US will never have the upper hand. like China will always have the upper hand because they have the scale and they have the chips on the table. you know The US doesn't. So the US will always come always be worse off.
00:32:40
Speaker
we're We're still the US. We got a lot of weight to throw around. right And I think it's worth noting like these these exports of green technologies are an increasing share of China's economy. right like I think it's like maybe 10% of GDP or 6% to 10% of GDP or whatever. But like it's still a minority share, like a significant minority share. right So tanking the whole economy or getting into a a whole economy trade war you know over this fraction of it is is a tough ask. The US still has a lot of weight to throw around in terms of our trade relationship with China and our trade relationship with the rest of the world. right yeah i mean and it's it's it's China has the upper hand on the supply side, but the US has a hand on on the demand side. right and if it If it totally cut off you know all exports from China to the US, that would be really bad for China's economy.
00:33:36
Speaker
right and would put a lot of people out of work you know and create ah the the kind of conditions that Beijing doesn't want to to see. So I agree. I mean, ah we should be concerned about the the position that that that China has, but I think there is you know there's a bit of mutually assured destruction type of dynamics here too, that a full blown trade war would have negative consequences on both sides.
Geopolitical Risks and Economic Conflict
00:34:02
Speaker
Yeah, i mean I think the problem is that, you know I've talked to Ian about this, our colleague who did IR for a long time, and basically the domestic incentives on both sides of the divide are to escalate. like Escalation is popular domestically in America, it's popular domestically in China.
00:34:21
Speaker
And even though a there's a positive sum outcome for both groups, for the individual politicians involved,
00:34:32
Speaker
it might not be um
00:34:36
Speaker
they might still want to keep going you know with that.
00:34:42
Speaker
Let's not forget that this rare earth minerals are also destined for military use. So I was wondering if there's any risks of further weapon like weaponization of them in geopolitical conflicts, like I'm thinking Ukraine or Palestine, which would kind of like divert from the need of consumers in the US.
00:35:08
Speaker
and would keep China's position relatively intact. It's hard to say. It's hard to say, right? Especially their relationship, China's relationship with Russia, right?
00:35:20
Speaker
um
00:35:22
Speaker
It's just not clear how far they'd be willing to go on the military front to really antagonize the US. Yeah, I mean, and that's the that's kind of the elephant in in the room here is there is, at least from the US s perspective, I don't know from China, there is a real sentiment and and and belief in the in certain corners of our you know kind of foreign policy leadership that that some kind of war with China probably over Taiwan is you know is is inevitable or at any rate very very likely. And um that would be horrible for a lot of a lot of reasons if it happened. And certainly would, you know I think that those are the kind of circumstances under which I think any of these sort of breaks as far as
00:36:13
Speaker
You know, that's that is the sort of circumstance, like if there is an actual war where consumers are and citizens are going to be willing to ah accept a lot more kind of economic like privation in order to to, you know, for the sake of these these types of measures.
00:36:30
Speaker
It's funny how we started with this being the least bad news of everything that's happened to Anthony. Now that we're talking about World War III, right? Yeah. Very quickly. World War III would be pretty bad. i think I think we can make the official podcast position of of the Innovation Matters podcast that we should not do World War III, please, and thank you.
00:36:57
Speaker
cosine cosine we cosigners yes Yeah. ah But anyway, yeah, I mean, it's, it's, it's a long way from that point. And even, you know, and things are not looking great on the sort of overall trade war front here, but we're still going to have to see how, how much appetite there is to escalate and, and, and how, how rapidly, um,
00:37:23
Speaker
you know and and And hopefully, it it it doesn't escalate um a or doesn't escalate too rapidly.
Conclusion: Preparing for Supply Chain Challenges
00:37:32
Speaker
But i you know I think from like an innovation planning standpoint, this is something that that should probably be pretty high on on everyone's prioritization list to really be looking at dependencies in their supply chain on on these types of critical minerals and and really investing and in alternatives, alternative sources, alternative technologies, alternative materials, ah recycling. and
00:37:59
Speaker
and all the rest kind of depending depending on the material and the product to be prepared for for this to potentially get worse before it gets better. yeah On that cheery note, if you like Innovation Matters podcast, you can check out all sorts of other great research, www.luxresearchink.com. We have a blog. We do webinars. We did a webinar on the US election. We're going to do more stuff on the US election coming up. um You can check us out. You can like and subscribe, and you can rate our podcast. We do appreciate when you like, subscribe, and rate the podcast. It really helps us out.
00:38:37
Speaker
Uh, with that, I think have a great weekend. Have a great day, everyone. Don't worry too much about world war three.
00:38:47
Speaker
Yep. Innovation Matters is a production of Lux Research, the leading sustainable innovation research and advisory firm. You can follow this podcast on Apple Music, Spotify, or wherever you get your podcasts. If you want more, check out www.luxresearchinc.com slash blog for all the latest news, opinions, and articles.