China’s recent export restrictions are widely viewed as a countermeasure to the United States’ export controls on advanced semiconductor chips, targeting major Chinese corporations like Huawei.
The ongoing export limitations imposed by China on essential semiconductor metals have resulted in significant backlogs in supply chains, raising concerns about potential chip shortages for Western manufacturers and consumers. These crucial metals, gallium and germanium, play vital roles in the production of chips, telecommunications gear, and military applications.
According to Statista, China dominated the global gallium production market in 2022, accounting for over 98% of total output, with Russia trailing far behind at just 0.81%. Additionally, China is responsible for approximately 60% of worldwide germanium production, as indicated by the Critical Raw Materials Alliance.
The Chinese government announced these export restrictions in July 2023, which took effect in August. Due to the rarity of gallium and germanium, these measures have significantly inflated their prices, particularly in Europe.
Data from the Financial Times, based on Chinese customs statistics, shows a notable decline in germanium exports from China, dropping from 13,514 kg in the latter half of last year to 12,410 kg in the first half of 2024. Similarly, gallium exports plummeted from 28,000 kg in the first half of 2023 to 16,000 kg by the second half of 2023.
While China asserts that these export controls are necessary to safeguard its national security interests, many analysts speculate that this is primarily a response to the U.S. measures restricting China’s access to semiconductors for military and artificial intelligence purposes. In retaliation, China has also limited exports of graphite and antimony, the latter being a mineral used in armor-piercing munitions.
Gallium is instrumental in various applications, including lighting, transistors, medical devices, and thermometers. Meanwhile, germanium is crucial for infrared optical instruments and plastic production. These restrictions could lead to shortages for critical technologies such as night vision goggles and fiber-optic communications, impacting availability and driving prices higher.
Europe’s Path to Establishing Gallium and Germanium Production
Following China’s announcement of export controls, the U.S. International Trade Commission noted that global supply chains for germanium and gallium are poised for substantial transformation starting August 1, 2023. These minerals are essential across numerous industries, including semiconductors, solar energy, and electric vehicle manufacturing.
The United States relies heavily on imports of these vital minerals, particularly from China, which holds a critical position as a leading supplier.
While some European companies currently possess stockpiles of gallium to sustain operations temporarily, the long-term outlook remains uncertain. Europe may struggle to ramp up its domestic production of these metals swiftly, as highlighted by SEMI Europe, a microelectronics industry organization. They cautioned that escalated trade tensions and continued export limitations could jeopardize the European semiconductor industry, based on the existing lack of production capacity.
Establishing a comprehensive value chain—from mining to processing—within Europe will demand significant time and investment. It could take several years to develop robust production facilities capable of meeting the industry’s needs and adapting supply chains and market pricing effectively.
Photo credit & article inspired by: Euronews
