China has announced that it will impose restrictions on the exports of gallium and germanium, two metals that are crucial for chipmaking. The new export curb, which will come into effect on August 1, is being implemented in order to “safeguard national security and interests,” according to China’s commerce ministry and customs department.
The move by China is seen as a retaliatory action in the ongoing chip war between China and the West. Gallium and germanium are widely used in the semiconductor industry, as well as in electronics and solar products. Therefore, this export restriction is expected to have significant implications for global supply chains and the tech industry.
Just days before this announcement, the Netherlands also restricted the sale of high-end chipmaking equipment abroad, a move believed to be aimed at China. Furthermore, the Biden administration is seeking to curb Chinese companies’ access to US-based cloud providers, according to reports.
The US first started limiting the sales of advanced semiconductors and chipmaking equipment to China back in October. This move by China can be seen as a warning to countries like the US, Japan, and the Netherlands that China has retaliatory options. It is also intended to deter these countries from imposing further restrictions on Chinese access to high-end chips and tools.
Analysts at Eurasia Group, a risk consultancy, believe that China may be using these export restrictions as leverage in discussions with US Treasury Secretary Janet Yellen, who is scheduled to visit Beijing for three days. The timing of the announcement suggests that China wants to send a message to the US and other countries ahead of the talks.
The semiconductor industry is now assessing the risks posed by these export controls, as companies around the world rely on gallium and germanium for their manufacturing processes. China currently accounts for about 80% and 60% of global gallium and germanium production, respectively. These metals are not found in abundance naturally and are primarily sourced as by-products of other industrial processes.
Although there is no major global shortage of gallium or germanium, China dominates their production due to its competitive production costs. Extracting these metals can be expensive and technically challenging, making it difficult for facilities outside of China to compete. As a result of the export restrictions, the prices of gallium and germanium are expected to rise in the short term. However, in the long run, other manufacturers in North America and Europe may increase their production to meet the demand and potentially lower prices.
In conclusion, China’s decision to impose export restrictions on gallium and germanium is a significant development in the ongoing chip war. The move is widely seen as retaliatory and aims to protect China’s national security and interests. The impact of these restrictions on the global semiconductor industry remains to be seen, but it is expected to disrupt supply chains and potentially lead to higher prices for these vital metals.