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China is restricting exports of two niche metals that are key to electronics and semiconductor manufacturing as technology competition from the United States and Europe intensifies.
Germanium and gallium are two metals that have received a lot of attention.
But what are they and how important are they?
Why is China restricting metal exports?
China and the United States are embroiled in a technology trade war that has been intensifying since 2019. Set up trade blacklists and broad export restrictions to cut China off from major technology components, semiconductors and chips.
These critical technologies are the focus of the battle between the two superpowers.
China hasn’t retaliated much so far, but in May it labeled U.S. chipmaker Micron a “serious security risk.” Now, the Chinese government is looking at areas where it has some strength: metals and materials used in electronics and semiconductors.
China’s Ministry of Commerce announced on Monday that new regulations will require gallium and germanium exporters to obtain licenses to ship the metals. The Chinese government has introduced new rules on the grounds of national security.
What are Germanium and Gallium?
Germanium and Gallium are metals that do not occur naturally. Instead, it is usually produced as a by-product of smelting other metals.
Germanium, a silvery-white metal, is produced as a by-product of zinc production. Gallium, on the other hand, the same soft, silvery metal, is a by-product of processing bauxite and zinc ore.
What are germanium and gallium used for?
Germanium is used in several applications, including solar products and fiber optics. This metal is infrared transparent and can be used in military applications such as night vision goggles.
Solar panels containing germanium can also be applied in space.
Gallium is used, for example, in the production of gallium arsenide compounds that can be used to produce radio frequency chips for mobile phones and satellite communications. This compound is also an important material for semiconductors.
Which countries produce metal?
According to the industry group Critical Raw Materials Alliance, China produces 60% of the world’s germanium and 80% of its gallium.
Gallium arsenide manufacturing is complex and only a few companies in the world are capable of it. One is in Europe and the rest are in Japan and China, according to the CRM Alliance.
How big of an issue are Chinese regulations?
The Eurasia Group said in a memo on Monday that it was “a warning shot, not a fatal one.”
“However, these latest measures are more limited in scope, with new rules requiring Chinese exporters to obtain a license first, but not automatically allowing exports to certain countries and end-users. There is no language that is strictly prohibited.”
The United States and Europe do not import large amounts of these substances. The United States received $5 million in metal gallium and $220 million in gallium arsenide in 2022, according to government data.
Data from S&P Global Market Intelligence show that in 2022 the EU will import $130 million of germanium, while germanium intake is even higher, with the country importing $60 million of the metal.
Other countries can also produce these metals. Belgium, Canada, Germany, Japan and Ukraine can produce Germanium. Meanwhile, Japan, South Korea, Ukraine, Russia and Germany produce gallium.
There are also potential substitutes for these metals.
China’s size has allowed it to produce at a lower cost than other countries, but Eurasia Group said the Chinese government’s move would have “limited impact on global supply given its scope”. pointed out.
“This is intended to remind countries, including the United States, Japan and the Netherlands, that China has options for retaliation, thereby discouraging further restrictions on China’s access to high-end chips and tools. It is an attack beyond the bow,” Eurasia Group said. Said.