Decoding China’s Export Restrictions on Germanium & Gallium
Decoding China’s Export Restrictions on Germanium & Gallium
Aug 18, 2023INTRODUCTION
Effective August 1, China has imposed export restrictions on germanium and gallium, two critical metals used in various high-tech industries. According to the statement from China’s Commerce Ministry, this means that exporters will be required to obtain a license for the export of these metals.
With China accounting for 60% of the world’s germanium and 80% of gallium of the world’s production of these metals,1 China’s export restrictions are expected to have a significant impact on global supply chains. China not only dominates the production of these metals but also holds a significant position in the supply chains of rare earth minerals utilized in various advanced technological products, along with being a major player in the production of lithium, cobalt, and graphite required for batteries.
Let us take a deep dive into what is happening:
Table of Contents
1. WHAT IS THE IMPORTANCE OF GALLIUM AND GERMANIUM?2. WHY IS CHINA SETTING EXPORT RESTRICTIONS?
3. HOW WILL CHINA'S EXPORT RESTRICTIONS IMPACT THE WORLD?
4. WHAT MEASURES ARE COUNTRIES TAKING TO SAFEGUARD THEMSELVES FROM THE LOSS OF SUPPLIES OF THESE METALS NEEDED FOR TECHNOLOGY?
INDEX RELATED TO THIS CONCEPT
1. WHAT IS THE IMPORTANCE OF GALLIUM AND GERMANIUM?
Gallium is a crucial component in the fast-growing class of semiconductors used in applications like phone chargers and electric vehicles. On the other hand, Germanium is used in solar cells, fiber optics systems, and infrared optics.
Although these metals are produced in multiple countries, China’s dominance in their production puts it in a position to significantly impact the global electronics industry. Therefore, the reliance on China for these metals poses risk to the global supply chain, warranting attention and alternative sourcing options.
2. WHY IS CHINA SETTING EXPORT RESTRICTIONS?
China’s decision to impose export controls on gallium and germanium is primarily driven by strategic motives. The Chinese government has cited the need to protect its national security and interests as a reason for these restrictions.
In 2022, the United States implemented a set of prohibitions on the export of semiconductor chips and other advanced high-tech equipment to China. Moreover, it successfully influenced its allies, namely the Netherlands and Japan, to impose restrictions on the export of chip-making tools.2
These measures can be seen as a retaliatory response to the U.S. and its allies’ restrictions on China’s access to semiconductors and chip-making technologies. By implementing export permits, China aims to gain more bargaining power in the global chip war and assert its dominance in the high-tech sector. This move is reminiscent of China’s export-quota system imposed on rare earths in 20103, which resulted in a dispute at the World Trade Organization.
3. HOW WILL CHINA'S EXPORT RESTRICTIONS IMPACT THE WORLD?
As China accounts for a significant majority of global production for these metals, the export controls are likely to lead to higher prices and potential supply shortages. Countries heavily reliant on these metals for their high-tech industries may face challenges in securing sufficient quantities outside of China. The short-term supply snags and increased prices could have adverse effects on various dependent sectors across the globe.
4. WHAT MEASURES ARE COUNTRIES TAKING TO SAFEGUARD THEMSELVES FROM THE LOSS OF SUPPLIES OF THESE METALS NEEDED FOR TECHNOLOGY?
As the world navigates the challenges posed by China’s export restrictions over rare earths, it becomes essential for countries to explore alternative strategies to reduce their dependence and ensure a resilient supply chain for these critical metals.
The United States is expected to release final and upgraded regulations related to export curbs on advanced chips and equipment.4 Additionally, the U.S. possesses substantial reserves of germanium in states like Alaska, Tennessee, and Washington. Other countries, such as South Korea and Japan, are also evaluating the impact of these restrictions and exploring ways to diversify their sourcing of critical materials required for their major industries, including semiconductors.
INDEX RELATED TO THIS CONCEPT
DISCLAIMER: The content provided in this blog is intended solely for educational purposes and should not be construed as investment advice. Indxx explicitly disclaims any endorsement, approval, or expression of opinion with respect to any issuer, security,
financial product, instrument, or trading strategy referenced. Any inquiries or requests for additional information can be directed to info@indxx.com.
References
1. CNBC 2. Reuters 3. Los Angeles Times 4. WSJ