The American arms dealer Lockheed Martin never expected that the consequences of not paying the fine of 99 billion yuan issued by the Chinese side would be so serious.

On February 16, 2023, the Chinese Ministry of Commerce did something significant by adding Lockheed Martin to the unreliable entity list and issuing a super fine of 99 billion yuan.

This number was not set randomly; it was exactly twice the amount of arms sales to Taiwan since September 2020, precisely targeting its illegal activities, so it is not something that can be casually fined.

However, the executives at Lockheed Martin's headquarters were dismissive and even sneered, probably thinking that their business focus was not in China and that this minor penalty was not a big deal, completely underestimating the severity of the situation.

We need to clarify that the unreliable entity list system was not a temporary measure; it was established in 2019 with specific regulations in 2020, specifically targeting foreign enterprises that damage China's interests for non-commercial purposes. There are laws to follow, and the approach has always been steady, precise, and ruthless.

Lockheed Martin's participation in arms sales to Taiwan stepped on China's sovereignty, crossing the red line. Could China let it go? When the fine was first imposed, some in the West claimed that the sanctions were 'symbolic', and Lockheed Martin thought so too, relying on the low share of its civil business in China, adopting a posture of being unafraid of the consequences, refusing to pay the fine, and even continuing to push forward arms sales to Taiwan, simply defying China's warnings.

But it failed to understand that the current global supply chain is like grasshoppers on the same rope; China holds critical links that are not trivial but are vital to its military production.

NATO has listed that the defense industry relies on 12 key materials, 7 of which China completely controls. In the weapons produced by the U.S. Department of Defense, thousands of components require antimony, over ten thousand require gallium, and over twelve thousand require germanium, with 87% of these supply chains coming from China.

Lockheed Martin produces advanced fighter jets like the F-35, each requiring 417 kilograms of rare earth elements, with the radar and core engine components relying entirely on rare earths. 92% of the world's yttrium oxide and 98% of gallium are produced in China. How can it build weapons without these?

At the beginning of the sanctions, China did not make an absolute statement, but when Lockheed Martin refused to pay the fine, it had no choice but to escalate the measures. First, it cut off its supply of rare earths, hitting it right where it hurts.

The U.S. has rare earth mines, but its processing capacity is almost zero; trying to develop it on its own would take at least a decade. In a hurry, it could only look to places like Vietnam and Australia for substitute materials.

However, those materials were completely unqualified, leading to a surge in radar failures, the stealth coating peeling off, ineffective engine blades, and issues with the fuselage skin. The Pentagon investigated, finding that the qualification rate for magnets from new channels was only 62%, and the radar failure rate of the F-35 tripled. Who would dare to use such weapons?

Production capacity has plummeted, with the F-35's delivery cycle extending from 61 days to 238 days, a 40% drop in production capacity, holding $179 billion in orders but unable to produce them.

Not only for fighter jets, but also for missile and rocket systems, the required deliveries could not be met, resulting in a breach of contract penalty of $800 million. This is just the direct loss; the chain reaction is even more critical. Once the supply chain is cut off, costs rise sharply, and quality is not guaranteed, leading customers to naturally reject it. NATO allies have started to speak out about reassessing their procurement, with some even pausing cooperation, and Lockheed Martin's reputation has been thoroughly tarnished.

Moreover, China's sanctions not only targeted Lockheed Martin itself but also affected its partners. China clearly stated that enterprises using Lockheed Martin components are banned from entering the Chinese market, forcing Western companies to choose sides: do they want the large Chinese market or to collaborate with Lockheed Martin? Airbus immediately banned the use of Lockheed Martin's avionics equipment, as no one is foolish enough to jeopardize their business for Lockheed Martin.

Lockheed Martin had originally hoped to rely on its partners for support, but ended up isolated, losing even the qualification to compete for sixth-generation fighter contracts because it could not present a qualified plan, and its technological research and development fell into a dead end.

Its previous covert layout in the Chinese civil market is also entirely finished. Projects like helicopter component production and ocean temperature difference power generation have all been cut off. Executives have been banned from entry, and import-export businesses have dropped to zero. The groundwork laid over the past few decades vanished overnight. Wanting to profit from military sales while simultaneously taking advantage of the Chinese market is a good thing that has long since come to an end.

The financial data is even more tragic; the net profit margin was still 10% in 2020, but it dropped to 4.7% in 2023, and by 2025 it is projected to drop dramatically, with quarterly net profits plummeting by 80%, and annual profit expected to fall from $6.5 billion to $2.2 billion, with the stock price dropping by 25% in a year, evaporating over $30 billion in total. Deutsche Bank even downgraded its rating.

Once the invincible global largest arms dealer, it now has to admit at its shareholder meetings that it is facing an unprecedented supply chain crisis. This is not just sanctions; it is almost a complete dismantling.

In the end, Lockheed Martin may finally understand that the 99 billion fine is not the main point; the key is how determined China is to maintain its sovereignty. It believed that China had no substantial means of attack, but in reality, as long as China grasps the critical links in the supply chain, it is equivalent to choking its throat.

Its arrogance stemmed from a misjudgment of China's strength and ignorance of the global supply chain, thinking that it could rely on the U.S. homeland to support it. The reality is that without China's key materials and supply chains, its military-industrial empire is just an empty shell.

In short, this is a self-inflicted wound by Lockheed Martin; touching the red line of national sovereignty and daring to underestimate China's penalties means they must bear the consequences. China has never been just talk; the system is in place, and the law is watching. Whoever dares to challenge the bottom line, no matter how big a giant they are, will have to pay the price.

The transition from dismissive laughter to a survival crisis for Lockheed Martin is the most genuine example. This is not some 'symbolic' punishment; it is a real-life strangulation of its lifeline, making it thoroughly understand that in front of China, arrogance never ends well.