Global Courant
In a chip war, China will restrict exports of the niche metals gallium and germanium and certain of their compounds in retaliation to the U.S. and Japan’s export bans on the shipment of advanced chips and chip-making equipment to China.
As of Aug. 1, Chinese chemical suppliers must apply for government licenses to export 38 products, including gallium nitride (GaN) and germanium dioxide (GeO2), China’s Commerce Ministry said in a statement. rack on July 3.
The metals are used in making chips, communications equipment and various defense items. Gallium is used in compound semiconductors, which are often used in combination with several other elements to improve transmission speed and efficiency in cell phone screens, solar panels and radars.
Germanium is used in fiber optic communication cables, night vision goggles and the solar cells used to power many satellites. US imports of gallium metal and gallium arsenide wafers in 2022 were valued at only about $225 million, according to US trade data.
China is by far the world’s leading source of both metals, accounting for 94% of the gallium supply and 83% of the germanium, according to a study of the European Union released this year.
Some analysts have already estimated that the impact of China’s bans will be limited as the US and Japan can import the materials from other countries or produce them domestically, albeit at significantly higher costs.
Chinese commentators said China’s export controls are aimed at slowing the pace of development of US and Japanese chipmakers, an effort to create the time and space for Chinese players to keep up in the critical race to forge smaller and smaller chip sizes.
“China is always committed to keeping global industrial and supply chains safe and stable and has always implemented fair, reasonable and non-discriminatory export control measures,” said Mao Ning, spokesman for the Chinese Ministry of Foreign Affairs. said in a media briefing on Tuesday.
“The Chinese government’s export control of relevant items in accordance with the law is a common international practice and is not targeted to any specific country,” she said.
As germanium prices are expected to rise, shares of Yunnan Lincang Xinyuan, a Chinese supplier of the chemical, rose 10%, prompting a suspension of trading on July 4. Shares of Chihong Zinc and Germanium rose 6.1%.
Tech war tit-for-tat
China’s metal ban came after the Dutch government said on June 30 that it will require ASML, the world’s largest manufacturer of chip-making equipment, to apply for export licenses for shipments of its DUV lithography systems, including the Twinscan NXT:2000i and later immersion systems.
The obligation takes effect on September 1. Twinscan NXT:2000i can make 38 nanometer chips in a single exposure. Prior to the Dutch ban, the Japanese government said in May that it would limit the export of 23 types of chip-making equipment from July 23.
A silicon wafer is seen through a scaled lens element. Credit: ASML
US media reported last week that Washington will ban Nvidia from exporting its AI (artificial intelligence) chips, namely the A800 and H800, to China. In late July, Biden will sign an executive order prohibiting U.S. funds from investing in China’s high-tech sectors, media reports said.
Chinese commentators applaud the tit-for-tat movement. “It is necessary for China to take effective measures to form an effective countermeasure against the US chip hegemony,” a columnist from Tianjin wrote on July 4. article.
He says the new export licensing system will allow China to identify the end users and uses of its metal products to protect its national security and interests.
The columnist also believes that by manipulating the supplies and prices of these important metals, China could influence the costs and profits of US and Japanese chip makers, thereby affecting their competitiveness.
He says the new export controls will also ensure stable supplies of gallium and germanium for Chinese chipmakers.
Global Reserves
Among the limited chemicals, GaN is a raw material used in the production of third-generation semiconductors mainly used in power grids, electric vehicles and telecom base stations.
GaN microwave radio frequency chips are used in missiles, radars and electronic countermeasures designed to trick radars through their ability to operate in high temperature and frequency environments.
By 2021, China will account for 84% of the world’s production capacity of primary low-purity gallium, a by-product of bauxite and zinc ore processing, the U.S. Geological Survey (USGS) said in a research report last year.
China’s market dominance was established after Japan, South Korea and Russia cut production after a large surplus of primary gallium markets flooded in 2012. Germany and Kazakhstan stopped primary production in 2016 and 2013 respectively due to the large supply.
Between 2017 and 2021, the US imported 53% of its gallium from China, 11% from the United Kingdom, 9% from Germany, and 7% from Ukraine, according to the USGS report. Since the US raised tariffs on Chinese goods, including gallium products, in 2019, it has begun diversifying its import sources into Canada, Japan and Singapore.
The USGS too said there are large reserves of zinc concentrates containing germanium in mines in the US states of Alaska, Tennessee and Washington. Between 2015 and 2018, the US imported 59% of its germanium from China, 22% from Belgium, and 9% from Germany. Both gallium and germanium can also be recycled from scrap.
A wafer of gallium oxide. Photo: New crystal
Wang Xinxi, a Guangdong-based technology writer, said in a recent article that China’s export controls cannot completely prevent the targeted countries from acquiring the two chemical compounds, although it will certainly drive up their prices.
He says China can produce gallium at a low cost because it has the world’s largest production capacity of aluminas and gallium extraction know-how. He claims it will be very expensive for Japan and the US to follow suit.
“In the short term, gallium and germanium prices will rise, while Chinese suppliers will benefit from this trend,” says Wang. “But this is not our goal. What we want is to increase costs and slow down the pace of development of the Japanese and US chip sectors.”
He said China could then expand its export controls to include indium compounds, which are also used in semiconductor manufacturing.
The Eurasia Group, a New York-based consulting firm, said in a research note that China’s export controls will have only a limited impact on global supplies given the intended scope of the bans.
According to the report, China just wants to remind the US, Japan and the Netherlands that it has retaliatory options if they take steps to impose further restrictions.
Read: China is eager to go with 3rd gen chips
Follow Jeff Pao on Twitter at @jeffpao3
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