China places curbs on chip material export, stumps suppliers

Published July 5, 2023
A central processing unit (CPU) semiconductor chip is displayed among flags of China and US, in this illustration picture taken February 17. — Reuters
A central processing unit (CPU) semiconductor chip is displayed among flags of China and US, in this illustration picture taken February 17. — Reuters

BEIJING: Companies caught out by China’s decision to restrict exports of two metals widely used in semiconductors and electric vehicles were racing to secure supplies on Tuesday as some industry suppliers worried that curbs on rare earth exports could follow.

Monday’s abrupt announcement of controls from Aug 1 on exports of some gallium and germanium products has ramped up a trade war with the United States and could potentially cause more disruption to global supply chains.

Analysts saw the move, which the Chinese commerce ministry said was to protect national security, as a response to escalating efforts by Washington to curb China’s technological advances.

It came on the eve of US Independence Day and just before US Secretary of Treasury Janet Yellen visits Beijing.

Trade war could potentially cause more disruption to global supply chains

“China has hit the American trade restrictions where it hurts,” said Peter Arkell, chairman of the Global Mining Association of China. The European Commission expres­sed concern, while Germany’s

Econ­omy Minister Robert Habeck said any broadening of controls to materials like lithium would be “problematic”.

One US semiconductor wafer manufacturer said on Tuesday it was applying for export permits, while a China-based germanium producer said buyer enquiries had come in as prices surged.

The eight gallium and six germanium products cited are also used in other high-tech industries.

Producer of rare earths

Some in the metals industry said they feared China could follow with new restrictions on rare earth exports, after curbing shipments 12 years ago in a dispute with Japan. China is the world’s biggest producer of rare earths, a group of metals used in EVs and military equipment.

“Gallium and germanium are just a couple of the minor metals that are so important for the range of tech products and China is the dominant producer of most of these metals,” Arkell said. “It is a fantasy to suggest that another country can replace China in the short or even medium term.” China produces most of the world’s gallium and germanium.

In 2022, top importers of China’s gallium products were Japan, Germany and the Netherlands, news website Caixin said, citing customs data. Top importers of germanium products were Japan, France, Germany and the US, it said.

The commerce ministry will meet with major producers of the metals on Thursday to discuss the export restrictions, four people familiar with the matter said.

In a sign of the potential for new production outside China, Nyrstar said it would look at germanium and gallium projects in Australia, Europe and the United States.

Export permits, disruption worries

US semiconductor wafer maker AXT Inc said on Monday its Chinese manufacturing Tongmei would seek permits to keep exporting gallium and germanium substrate products.

An Intel spokesman said the company was assessing the ministry’s statement, adding: “Our strategy of having a diverse, global supply chain minimises our risk to local changes and interruptions.” A source at Infineon said most supplies come from outside of China. The German chipmaker produces gallium nitride semiconductors in Villach, Austria and will soon make them at its factory in Kulim, Malaysia.

Germany’s BDI industry group said China’s move strengthens the argument for greater raw materials independence.

Published in Dawn, July 5th, 2023

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