China’s gallium and germanium metal export restrictions may encourage some countries to diversify their supply chains from China.
“This may be a wake-up call for some people. [countries] We will gradually ramp up production elsewhere,” Stewart Randall of Shanghai-based consultancy Intralink told CNBC.
“On the other hand, if China does nothing, most people in the world will happily remain dependent on China,” Randall said.
China’s Ministry of Commerce announced last week that it would restrict exports of two key metals in semiconductor manufacturing, gallium and germanium, from Aug. 1, in a move seen as a warning to Europe and the United States in a technology war over advanced chips. be done. .
China produces 60% of the world’s germanium and 80% of its gallium, according to data from the industry group Critical Raw Materials Alliance.
more likely to be seen [export restrictions] And it will likely affect other materials like rare earths, again with China controlling more than 85% of production…
Luisa Moreno
President of Defense Metals
Both the European Commission and the United States express concern About China planned curb.
Brady Wang, associate director at Counterpoint Research, told CNBC: “China’s suspension of metal exports is actually a wake-up call. European countries need to have their own supply chains. It reminded me of that,” he said.
China may impose further regulations
Luisa Moreno, president of mining company Defense Metals, expects China to further restrict exports of metals that may contain rare earths.
Rare earths are essential in high-tech consumer products such as smartphones and military equipment such as radar systems.Consists of rare earth A group of 17 elements It is composed of scandium, yttrium and lanthanides.
‘There’s a good chance we’ll see more’ [export restrictions] And it will likely affect other substances like rare earths, again with China controlling more than 85% of production,” Moreno said Tuesday on CNBC’s “Street Signs Asia.” rice field.
In 2010, China suspended rare earth exports to Japan due to territorial disputes. China also threatened to halt rare earth exports to the United States in 2019.
”[The impact from the metals curbs] It’s not a big problem in the short term, but if China forces it, [curbs on other critical materials]It’s going to be a long-term problem,” Counterpoint’s Wang said.
Intralink’s Randall said, “Blocking exports not only hurts Chinese companies, but it could also cause them to lose foreign customers, so China needs to be careful.”
Diversify away from China
One of the key material suppliers said the factory was preparing to start producing gallium. The two metals that will be subject to China’s upcoming regulation do not occur naturally and are typically produced through refining processes of other metals.
“We’ve been receiving a lot of customer inquiries and a lot of activity in the marketplace,” said Ross Bernson, president and chief operating officer of Indium Corporation. We are working together,” he said. CNBC’s “Squawk Box Asia” on Wednesday.
Indium supplies key materials such as gallium and germanium to the world’s electronics and chip companies.
“Right now, we have about 10 factories that can start producing gallium … and if we can get these production units up and running, we will have enough gallium in the rest of the world,” Barntson said. Stated.
China produces most of the world’s gallium and germanium, but it is not the only producer.
Russia, Ukraine, Japan and South Korea generate gallium, according to a 2021 study by the Government of India. Canada, Germany, Japan, Slovakia and the United States recycle gallium from new scrap.
Belgium, Germany and Russia, on the other hand, manufacture germanium, based on US Geological Survey data. The US can also recycle old and new scrap as germanium.
“Metals such as gallium and germanium are not special metals. China is a major supplier of these metals, which is helping keep metal prices in check,” said John Strand of telecom consultancy Strand Consult. rice field.
“Even if we crack down vigorously here, it’s really just the whole picture,” Kreet Willems, a partner at law firm Akin, Gump, Strauss, Hauer & Feld, told CNBC’s “Squawk Box.” “My view is that it has more of an impact on prices than it has on supply.” Asia on Tuesday.