Bill Gertz, writing in the Washington Times, reported that the Navy uses the material in advanced sonar systems for tracking enemy submarines. U.S. officials told him that the Chinese could use the material to develop multiple-warhead ballistic missiles as part of their overall strategic nuclear force modernization. Gertz said that sales of the material are strictly controlled and require an export license.
The FBI has alleged that two Chinese students stole information about the material in a "computer hacking incident." One of the students attended Iowa State and was said to have worked closely with the Ames Lab. One of the two students admitted supplying the Chinese military with the Terfenol-D data. Over the years, the U.S. Navy has spent millions of dollars in research to create the smart material.
In 2003, the Congress appropriated over $5 million for continued research on the material.
The FBI cites this as a good example of how the Chinese are acquiring dual-use military technologies in the United States. In an interview with the Associated Press, a senior FBI official charged that many of the thousands of Chinese visitors, students, and businessmen come to the United States each year with tasking from Beijing to collect intelligence information.
The Pentagon report labeled academic exchanges as one of the prime methods the Chinese use to collect sensitive technologies, like Terfenol-D. The report also said the authoritative Chinese journals have recommended an increase in the use of overseas ethnic Chinese scientists to acquire foreign technologies.
In the same Associated Press interview, the FBI official labeled China "the greatest espionage threat to the U.S. over the next ten to fifteen years." Echoing the now largely forgotten Cox Report, he said the Chinese have set up more than three thousand "front" companies in the U.S. to run espionage operations.
Overall, the FBI believes that there are now more foreign spies operating in the U.S. than ever before. To counter this threat, the FBI is trying to rebuild its counter-espionage capabilities. These were largely dismantled in the 1990s. The FBI sections devoted to Chinese espionage were hit especially hard.
The Bureau is now trying to reconstitute that capability, but such a feat cannot be accomplished overnight.
"Etrema Products, Inc., a wholly owned subsidiary of Edge Technologies, Inc., of Ames, IA, and the sole supplier of the giant magnetostrictive alloy TERFENOL-D®, signed an agreement with Westport Innovations, Inc., of Canada to supply the alloy for use in diesel engines. Westport Innovations plans to use the “smart” material to control fuel flow in natural gas fuel injectors in light-duty diesel engines. Smart materials have the ability to adapt to outside influences, such as external magnetic fields. TERFENOL-D® is an alloy of iron and the rare-earth elements terbium and dysprosium that expands or contracts with the application or removal of an external magnetic field. It is used in actuators, acoustic devices, sonar, ultrasonics, and other smart materials for the oil and gas industry (Etrema Products, Inc., 2000a). ...
Components for the next generation of the U.S. Navy’s hybrid sonar system are being developed using rare earths by Etrema Products, Inc. Using TERFENOL-D®, an iron-terbiumdysprosium alloy, the sonar system combines traditional piezeoceramic technology to produce an improved detector system for the Navy’s new class of destroyers. The new hybrid materials reportedly created smaller sonar sound sources with higher power and broader bandwidth (Etrema Products, Inc., 2000b).
Sounds like Terfenol-D is not a military secret, or why would it be sold for use on diesel engines in Canada? Also, since it is open knowledge what the substance does and what it is made of, and therefore it has probably been patented, the Chinese could probably recreate it themselves. Sounds like they just wanted to acquire the last few manufacturing details the easy way.
Nevertheless, the Chinese do seem to be interested in acquiring magnetic technologies as is also shown by their recent purchase of Magnaquench. Our export restriction laws need to be tightened (and enforced).