China electronics

China to curb exports of certain semiconductor materials

Image credit: Danciaba-Dreamstime

China's commerce ministry has announced it will place a limit on the amount of gallium and germanium products exported from the country in the latest move in the US-China 'chip wars'.

The move has been justified as a decision by the Chinese government to "protect national security and interests", but experts have interpreted it as a retaliation measure against restrictions on the exportation of US and European semiconductor technology to China. 

The eight gallium and six germanium products affected by the curbs are widely used in the production of semiconductors, electric vehicles and military equipment, and could cause a disruption to global supply chains.

The export controls will begin on 1 August, China’s Ministry of Commerce said in a statement. From that date on, exporters of gallium and germanium will be required to apply for “special permission from the state” to ship them out of China, the government added. 

China is currently the biggest producer of gallium and one of the world's largest producers of germanium, both materials that have been placed on the European Union’s list of critical raw materials, which are deemed “crucial to Europe’s economy.”

"China has hit the American trade restrictions where it hurts," said Peter Arkell, chairman of the Global Mining Association of China.

"Gallium and germanium are just a couple of the minor metals that are so important for the range of tech products and China is the dominant producer of most of these metals. It is a fantasy to suggest that another country can replace China in the short or even medium term." 

In addition to China, other importers of gallium products include Japan, Germany and the Netherlands, according to news website Caixin. Meanwhile, Japan, France, Germany and the US were identified as the main global importers of germanium products.

In order to continue exporting these materials, some companies have already announced they would apply for the required licenses from the Chinese government, including AXT's Chinese subsidiary Tongmei.

"We are actively pursuing the necessary permits and are working to minimise any potential disruption to our customers," said AXT chief executive officer Morris Young.

Despite the concerns raised by consumers and industry players, government officials in both Taiwan and South Korea denied that the measure would cause significant supply chain disruptions. 

Taiwan Deputy Foreign Minister Roy Lee said he only expects a short-term impact, while South Korea's industry ministry said in a statement the country had sufficient stockpiles of gallium while there were other sources of germanium.

The announcement has been made in anticipation of a visit by US Treasury Secretary Janet Yellen to Beijing.

"I think we gain and China gains from trade and investment that is as open as possible, and it would be disastrous for us to attempt to decouple from China," she said during an appearance before Congress last month.

The US has restricted China’s access to semiconductor technology since at least 2019 when the Trump administration banned Huawei from buying vital US technology. In August 2022, the US further prohibited the export of four technologies tied to semiconductor manufacturing, citing how they were “vital to national security” and signed a “historic” bill aimed at boosting the domestic production of semiconductors.

In May, China made its first major move in the trade war with Washington, by telling its operators not to use Micron chips in certain infrastructure projects, due to national security concerns.

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