How does China's natural sand export ban to Taiwan affect the world?

How did China affect the Indian auto industry by banning sand exports to Taiwan?

In a series of retaliatory moves to explicitly punish Taiwan for inviting US House Speaker Nancy Pelosi to the island, China has slapped its neighbor with a slew of economic sanctions. Among them is a ban on exporting natural sand from the mainland to resource-hungry Taiwan.

While the world is engaged in tracking oil and gas flows that determine the inflation trajectory in most countries, it may be strange to know that sand is the most consumed natural resource after water. It is not only the most sought-after resource, but also one that is rapidly depleting. How is this possible with apparently infinite sand covering the earth?

just no sand

Certain types of sand, mixed with water, form concrete – the foundation of the real estate industry. Some expanses of earth are nothing but sand, it is true, but desert soil cannot be used to make concrete. It is wind eroded and therefore too smooth for the individual grains to lock together to form concrete.

The sands of rivers and lakes, banks and floodplains and beaches are also most useful for industry. It is a profitable business which has also given rise to illegal mafia which runs black market for sand.

In addition to real estate, sand also has applications in semiconductor fabrication, an industry that is a pillar of Taiwan’s economy. The $147 billion semiconductor industry accounts for 15 percent of Taiwan’s GDP and accounts for about 40 percent of its exports.

Has the embargo hurt Taiwan?

In recent years, Taiwan has increased its domestic capacity for sand mining and has turned to other countries for imports to make up for any shortfalls.

Data from Taiwan’s Bureau of Mines website shows that for 2020 and 2021, imported natural sand accounted for about 0.64 percent and 0.75 percent (450,000 and 540,000 tons) of Taiwan’s domestic demand. China supplied only 70,000 and 170,000 tonnes in 2020 and 2021 respectively.

The bureau said Taiwan had assured national supplies for sand and gravel this year because of improved dredging efforts in rivers, streams and reservoirs. The bureau says Taiwan is expected to produce a total of 48.85 million tonnes of sand and gravel this year.

TaiwanNews.com reported that the Ministry of Economic Affairs said that the shortage of sand in the northern region would be met by supplies from the Northeast. The rest will be compensated by increasing imports from Southeast Asia.

While Taiwan has repeatedly insisted that its domestic needs will be protected this year by things produced by the island, its ability to meet worldwide demand remains unclear.

However, any blockade of resources and trade routes that could hurt semiconductor exports is also likely to rebound on China, which also receives a significant portion of the chips from Taiwan.

Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis in Hong Kong, told Al Jazeera that holding back sand exports to Taiwan could have a significant impact on a country where construction spurred growth during the pandemic. “I wouldn’t say it’s a major export from China but it hurts Taiwan,” García-Herrero said.

Julian Chase, an expert in investment and trading at the City University of Hong Kong, called the measure “symbolic”. Chaisse told Al Jazeera, “I think China took this measure because it will remain in place, that is, it is not a sanction that can be expected to be withdrawn before many years.”

Analysts expect more economic sanctions to be imposed to punish Taiwan. They can be mostly in the nature of agricultural and food trade restrictions.

Lack of a global chip?

The Federation of Automobile Dealers Association of India has warned that semiconductor shortage is coming to the fore once again. Association president Vinkesh Gulati was quoted by news agency ANI as saying, “Due to this (Chinese military escalation), the threat of semi-conductor shortage is looming once again as chip maker TSMC raises a red flag that if War ensues, Taiwanese chip makers will be made ‘non-operable’.

Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest chip maker and produces key technology for tech giants such as Apple and Nvidia. During his controversial visit to the island, Pelosi also met with TSMC Chairman Mark Liu, underscoring the importance of semiconductor chips to US national security. The escalating conflict in the Taiwan Strait will disrupt US-focused supply chains.

China also manufactures semiconductors but does not match the grade and quality of its neighbor and is also dependent on the island for its advanced chip supplies. According to an article in The Diplomat, China’s Semiconductor Manufacturing International Corporation (SMIC) can only produce 45-nanometer chips, while TSMC now produces 3-nanometer chips.

When the pandemic-induced chip shortages occurred, TSMC’s Liu told TIME in an interview that there were companies exacerbating the crisis by halting supply chains. He said more chips were going to factories but less were going into finished products. This coincides with the huge demand for consumer electronic devices as the world switched to work-from-home arrangements due to the lockdown.

All these problems threaten to reoccur in the world, which could see an increase in the cost of automobiles, smartphones and other electronic devices. According to Goldman Sachs

Meanwhile, the world chip shortage has already affected 169 industries, including industries such as steel and concrete production, according to a Goldman Sachs analysis reported in the media. Even soap manufacturing suffered a setback as production of mechanized dog washing machines (powered by chips) had stalled and the shampoo that had gone into equipment had no buyers.