China’s recent announcement of export controls on two metals used in computer chips and solar panels, gallium and germanium, has escalated concerns in the ongoing chip war between China and the United States. These metals are crucial for the global chipmaking industry and have military applications as well. The move by China is seen as a potential retaliatory measure in response to the U.S.’s restrictions on semiconductor technology access.
China’s dominance in mineral supply chains, including rare earth minerals and metals like gallium and germanium, has raised concerns about economic competition and national security. The country produces 60% of the world’s germanium and 80% of the world’s gallium, giving it significant control over the supply chains for high-tech products and batteries.
The export controls imposed by China are not a complete ban, but there are worries that China could reduce the amount it sells as a form of retribution. This move comes as U.S. Treasury Secretary Janet Yellen is set to visit China, adding to the existing tensions between the two countries.
Both the U.S. government and Congress view China’s control over critical minerals as a threat to national security. The U.S. has already imposed its own export limits on semiconductor manufacturing equipment, and other countries like the Netherlands have followed suit.
The European Commission has expressed concern over China’s export controls, doubting their connection to security and calling for adherence to World Trade Organization rules. The EU sees gallium and germanium as strategic raw materials for its green and digital transition.
Gallium and germanium are essential materials for semiconductors and have drawn comparisons to China’s previous attempts to restrict rare earth exports. China’s dominance in mining and processing operations, along with state subsidies, has allowed it to maintain market dominance and export these critical commodities at lower costs than competitors.
While China’s export controls on these metals are seen as a warning shot in the chip war, alternative producers and substitutes exist, reducing the immediate impact on the United States and its allies. However, experts warn that more restrictions, potentially targeting rare earths, could be on the horizon if the dynamics between the U.S. and China do not change.
Export restrictions are a double-edged sword for China, as past attempts to leverage its dominance in rare earths have led to reduced availability and increased prices. This has incentivized mining and processing ventures outside of China, reducing its market dominance.
As the chip war between China and the United States intensifies, the control and supply of critical metals like gallium and germanium have become central to the competition. The implications of these export controls and potential future restrictions continue to be a cause for concern for both countries and the global semiconductor industry.