2023-09-24 20:36:04
Analysts warn that the national security argument might lastingly affect the semiconductor supply chain and accentuate the shortage in the sector. China’s August customs data revealed that its exports of germanium and gallium, two rare minerals essential to making semiconductors, fell to zero. This comes regarding a month following China implemented national security restrictions. These restrictions follow the escalation of tensions in the trade war (for advanced technologies) which pits China once morest the United States and its allies.
The trade war between China and the United States has been going on for more than a decade, but has become more pronounced with the arrival of Donald Trump in power. The United States has accused China of undermining its national security through hacking campaigns and technological equipment incorporating backdoors intended for espionage. Many leading Chinese companies, such as Huawei, have paid heavily for this conflict and the United States has implemented restrictions on exports to China. For its part, China seems to respond by also relying on the argument of national security.
The communist Asian country put restrictions in place this summer on exports of metals and rare earths essential to the manufacture of semiconductors, citing national security reasons, but without giving further details. In August, regarding a month following the decision was announced, Chinese exports of gallium and germanium, two rare minerals essential for semiconductor manufacturing, fell to zero. According to data released this week by Chinese customs services, in July the country exported 5.15 metric tons of forged gallium products and 8.1 metric tons of forged germanium products.
Although germanium and gallium are considered minerals, they do not exist naturally. They are byproducts of the refining of other metals. Germanium is the chemical element used in solar products and optical fibers, but can also be used in military applications such as night vision goggles. Gallium is used to make the chemical compound “gallium arsniide” (compound of gallium and arsenic). The latter is used to manufacture radio frequency chips for cell phones and satellite communications, as well as semiconductors and lasers.
According to analysts, these restrictions are likely to pose long-term problems. Critical Raw Materials Alliance, an EU initiative, estimates that China produces around 80% of the world’s gallium and 60% of germanium. However, it did not sell any of these items in international markets last month, forcing companies to seek alternative suppliers or wait for waivers from China’s Commerce Ministry. Some sources indicate that purchases of Chinese minerals increased before the restrictions came into force. This might explain the absence of exports in August.
Asked regarding the lack of exports last month, He Yadong, a spokesperson for China’s Commerce Ministry, told a news conference Thursday that the ministry had received requests from companies wanting to export the products. two materials. Some requests have been approved, he said, without giving further details. The restrictions took effect on August 1, requiring exporters to apply for a license to ship gallium and germanium compounds. Export license applications must identify importers and end users and specify the use to which these metals will be put.
These restrictions demonstrate China’s apparent willingness to retaliate once morest US export controls, despite concerns regarding economic growth, as a technology war looms on the horizon. However, analysts say restricting exports is a “double-edged sword” that might hurt China’s economy and accelerate the shift of supply chains out of the country. China may be the industry leader in producing both elements, but analysts at Eurasia Group say there are other producers.
In a report released in July, they also said there are substitutes available for both materials. Meanwhile, the impact of the collapse of Chinese exports is already being felt domestically. Gallium prices fell in China as export controls led to an increase in inventories. According to information from the Shanghai Metal Market, on Thursday, the spot price of gallium stood at 1,900 yuan ($260) per metric ton, down nearly 20% from the beginning of July. The spot price of germanium increased slightly due to insufficient supply.
China’s move has intensified the technology war with the United States over who has access to cutting-edge chipmaking technologies, which are essential for everything from smartphones, self-driving cars and computer manufacturing. weapons. Last October, the Biden administration unveiled a series of export control measures banning Chinese companies from purchasing advanced chips and chipmaking equipment. Purchases now require a license. But for Washington’s campaign to be successful, other countries must participate.
Japan and the Netherlands joined the effort earlier this year, further reducing chip exports to China. Washington envisage also restrict China’s access to US cloud computing services to prevent it from leasing advanced GPUs, such as Nvidia’s A100 and H100 accelerators, to fill its AI chip gaps. Beijing responded to Washington’s restrictions by launching an investigation into the cybersecurity of American chipmaker Micron earlier this year, before banning it from selling Chinese companies working on key infrastructure projects.
However, despite US sanctions, Huawei a prsent last month the Mate 60 Pro smartphone, which caused shock waves in the world of technology. This model is equipped with an advanced chip, created despite American sanctions aimed at preventing the Chinese technology giant from accessing this type of technology. The release of the Mate 60 Pro has created political pressure for the United States to strengthen sanctions once morest Huawei and Chinese chipmaker SMIC (Semiconductor Manufacturing International Corp.). The latter would have manufactured the advanced chip that drives the new Mate 60 Pro smartphone.
In 2021, the United States and its allies announced their intention to want to build a technology supply chain without China to support the chip, battery and rare earth minerals industries. According to US President Joe Biden, this should help address supply chain vulnerabilities in critical sectors of the economy. Biden’s goal is to develop supply chains less dependent on China for chips and other important products. It should do this in partnership with Taiwan and countries like Japan and South Korea.
But many reports have pointed out that China’s chip industry is booming and might catch up with the United States in the near future. However, experts warn once morest arbitrary restrictions that might exacerbate problems in global supply chains, particularly for semiconductors. This might worsen the chip shortage, which is barely being resolved, and slow down technological innovation.
And you ?
What is your opinion on the subject?
What do you think of China’s restrictions on exports of minerals essential to chip manufacturing?
In the long term, what might be the impacts of these restrictions on the global semiconductor industry?
Do you think secondary markets can replace China in the production of these minerals?
What do you think of the US restrictions on exports of advanced technologies to China?
How can Europe ensure a continuous supply of these minerals and ensure its technological sovereignty?
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