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Welcome to Tech News Briefing. It's Wednesday, May 7th. I'm Victoria Craig for The Wall Street Journal. Today, a show about cars, China, and the way tech industries in the world's two biggest economies are actually reliant on each other to succeed. First, we'll look at a startup that's trying to end America's dependence on China for rare earths metals by excluding them in the design of new electric motors. Then, we talk a lot about the dependence of America's tech titans on China for critical components.
But the inverse is also true. Our Deputy Beijing Bureau Chief walks us through how the trade war has exposed China's dependence on the U.S. for chips that drive its own auto industry.
But first, building an electric-powered motor without rare-earths metals? Say it ain't so. Rare-earths metals are used to create critical tech components, and they've been a focus for the Trump administration recently, specifically how to source more of them from the U.S. But what if we don't need them for one big use case? Cars.
WSJ tech columnist Christopher Mims says it's a real possibility and it could lead to more American-made vehicles. Chris, how does this electric motor minus rare earths work? There's a company called Conifer. They're based in Silicon Valley, and they have found a cheap way to make a rare earths free motor. Their first application is going to be like Vespa style scooters. Turns out that's a huge market. There's a billion of those in the world.
But, you know, this could go into those vacuum cleaners. It could go into your HVAC system. It could be scaled up. It could go into electric vehicles. So that's a big deal. It just means local supply chains for motors eventually all over the world. Because the only thing you need to make these motors are some power electronics, some steel and some rust. They actually used just iron based magnets. It's oxidized iron. Make it from rust.
Now, without getting too much into the weeds, because you'll lose even me, just tell us how this new kind of motor could actually work in practice. They just drop it in where you would use a normal motor? How does that work? Yeah, that's right. Typically, it might be like an in-wheel motor. So in most vehicles, the motor is sitting somewhere under the chassis of the car. This motor would actually be in the wheel itself, which gives you some other advantages like traction control.
And without getting too in the weeds, a lot of what's going on here is that they are making clever use of a different kind of motor technology than what we've used for the past 200 years.
So for the nerds, the regular motors are radial flux. These new ones are axial flux. But that's as far as we have to go into that. Okay, good. You haven't lost me yet. So good sign. Now, the dream of this new startup company that you have been talking to, Conifer, their dream is an affordable, easy to make electric motor made from materials, right?
right here in America. But how realistic, how feasible is that? And how quickly could that happen? This is happening now. So they have conversations with EV makers happening. Their first customer that they were able to connect me with is called Lyra Energy. They're based in Los Angeles. They want to make the Tesla Vespa style scooters for the developing world.
So this is on a relatively smaller scale because we're talking about startups using it in limited applications at this point. But if we wanted to think about a world in which this could be used in every electric vehicle on the road in America, what's the timeline like on that and what are the hurdles that need to be overcome in order to achieve that?
So within four years, you could have rare earths free motors of the kind made by conifer and electric vehicles. One challenge though, is that because these motors are rare,
Typically a bit less powerful than the current ones. They really have to be in the wheels. Turns out that just makes it more efficient. You don't have to transmit the power through a bunch of gears. It's an early days market within the early days market of electric vehicles. Especially in the context of the trade disputes that we're seeing with tariffs all over the world, moving manufacturing back to the U.S. is a big priority for President Trump. How would this
fit into that broad overall goal of bringing vehicle manufacturing to the U.S.? Between domestic manufacture of microchips, new kinds of batteries, which
can be based on things like sodium, which is very easy to obtain. We really do have a sight line toward an entirely made in North America vehicle. I mean, from the moment that the materials are dug out of the ground, it'll take a while and it'll take a lot of support and just taxing imports isn't going to do it on its own. But 20 years from now, it could be a very different conversation.
That was WSJ tech columnist Christopher Mims. Coming up, Beijing's move to exempt certain imports from tariffs shows its carmakers' vulnerabilities to the trade war with the U.S. We'll have more on that after the break. This is a CRM Meltdown.
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Tariff exemptions in the trade spat between Washington and Beijing illustrate how vulnerable the tech industry is to the ongoing conflict. President Trump has so far allowed smartphones, laptops, memory chips, and other electronics not to be subject to U.S. tariffs on imports from China, while Beijing has said certain semiconductors and chipmaking equipment are exempt from its own retaliatory tariffs on American imports.
WSJ Deputy Beijing Bureau Chief Yoko Kubota writes that one consequence from this trade war has been the exposure of the depth of each side's reliance on the other, especially when it comes to tech. Yoko, your story focuses specifically on imports of American chips for cars to China. Just walk us through that. How dependent are Chinese automakers on U.S. chips? Sure.
China has over the years, they've been trying to become more self-reliant on many goods, including semiconductors, because of all the American export controls, etc. They realized that they could face pain if they're cut off from foreign flows of semiconductors. But despite all those efforts, actually, China is still reliant on foreign chips, and that includes some American-made chips.
So last year, China's imports of semiconductors hit $412 billion, and that was still up 10% from 2023. So you can see that actually, if you look at the import trends over the years, it's still been on a growing trend.
So what is the difference between the chips that American companies need to import from China to make things like iPhones and computers to put in all of these data centers that power AI and the ones that China needs for cars? Because that's really what your story focuses on. That's right.
So the chips used in smartphones and also AI platforms, etc., those tend to be advanced chips. They tend to be really, really small and they require manufacturing tools and technology that are very advanced.
Meanwhile, car chips tend not to be quote-unquote so advanced in that sense. They tend to be a little bit bigger. It is possible to make them, generally speaking, using older manufacturing technology. So there's a difference there. For cars, we're talking about chips like so-called MCU, microcontroller units, analog chips, nose control signals. Those tend to be quite often used in cars. And more recently, because there are smart cars, because there are
advanced driver-assistant technology, et cetera, chips involved in that technology made by some American companies like Qualcomm, Nvidia, those tend to be popular too.
The Chinese government has been trying to encourage automakers to get Chinese-manufactured chips rather than relying on American producers of them. So in the same way that I constantly ask people on this show, how likely is it that we can make things in America? I'll ask you, how likely is it that Chinese companies can make these chips that Chinese automakers need?
So China has set up a target, a guidance that it has communicated to Chinese carmakers. And that was, let's make sure that the chips in your cars, a quarter of them are made in China by this year, 2025. But so far, it looks like it's just
not easy to attain that quickly. Last year, that figure was apparently at about 15%. So it's kind of an aggressive target to go to 25% by this year. There are a couple reasons why that's looking a little bit difficult when it comes to these car chips. One is that cars, they tend to have very strict safety requirements. So it might be a little bit different from replacing chips in other products like electronics versus cars.
They take years often to validate. It's a little bit longer development cycle than other products. So there might be a little bit of that time cycle and safety issues involved there. The other thing is a lot of the dominant players, the foreign players, which include Texas Instruments and other European and Japanese players, they've been around in the market for a long time and they offer a
variety of products. So there's a solid product lineup. And it's just easier for car makers to choose from a company that offers a solid product lineup instead of a Chinese semiconductor maker that offers one new product. So there's that difficulty when it comes to switching chips as well. And what has the Chinese government said about any of this? The Chinese government didn't respond to a request for comment for this story.
So, Yoko, you talk about how U.S. companies are already making chips in China. Is it that now they'll just try to push some of these companies that they already work with to make more of these chips in China so they don't have to start from scratch with their own homegrown companies? Two things are going to happen here. One is that
the Chinese carmakers will ask American and other foreign chip makers to make more chips in China so that they can continue using the foreign company's chips, but it's just seen as made-in-China chips. But the other thing that we're already seeing is that the Chinese chip makers, the relatively new players, they're very aggressive in trying to win business from their foreign rivals. They see it as a once-in-a-lifetime chance that
they could be taken seriously and that this is the chance to prove their technology. So we will also see Chinese car makers shifting to locally produced chips. Again, it's just that the shift is taking a little bit of time and probably both things are going to happen at the same time.
That was Yoko Kubota, The Wall Street Journal's deputy bureau chief in Beijing. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer Melanie Roy. I'm Victoria Craig for The Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.
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