China starts restricting exports of germanium and gallium for tech product manufacturing

Alfonso Maruccia

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In context: Germanium and gallium are instrumental in manufacturing power chips, radio frequency amplifiers, LEDs, and many other silicon-based components. They aren't scarce metals, but China has been providing the world with cheap germanium and gallium for decades. However, new policy changes could affect global supplies.

China recently announced new export restrictions on germanium and gallium – two fundamental elements for chip manufacturing. As of Tuesday, Chinese companies interested in doing business abroad need to secure a proper export license from Beijing authorities. "Pure" germanium and gallium export, as well as export of any product which includes the two elements, are affected by the new restrictions. The Ministry of Commerce said that as long as exporting companies will comply with national security protocols and other local regulations, export operations will continue as usual.

The timing of the new restrictions suggests they are in retaliation against the US for tightening export restrictions on "AI chips" in July, and they could have remarkable consequences on chip manufacturers all over the world. China controls more than 90% and around 60% of the global production of gallium and germanium, respectively. The announcement of the proposed restrictions caused a 20 percent price hike for gallium in the US and Europe in July.

China's dominance in exporting these metals has heavily relied on their ability to refine them cheaply. The materials have become part of Beijing's effort to assert its economic position in the geopolitical clash with the US and other Western nations. The export restrictions should not seriously impact the production of silicon components like CPUs and GPUs. However, the compounds gallium nitride and gallium arsenide, used in manufacturing LEDs, radio amplifiers, and other essential technology components, might feel a more significant sting.

Japan could be the country most affected by the new export policy. According to stats from the Japan Organization for Metals and Energy Security, Japan imports 60 percent of its gallium supply. Of that portion, 70 percent is imported from China, making the country the world's largest consumer of commercial gallium.

Japanese compounding companies claim to have enough supply to avoid issues in the short term. Mitsubishi Chemical Group, a company making compound semiconductors and other products, is betting on its "ample" inventories. The same goes for gallium nitride substrate manufacturer Sumitomo Chemical and LED maker Nichia Corp. All said they are monitoring the situation closely.

The long-term prospects for Western countries, international corporations, and Japan could be to rework their investment in local production or material recovery from electronic waste, reducing their reliance on China's resources. So this geopolitical move could be a double-edged sword for the communist nation in the long run.

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And now that $2,000 GPU or $800 CPU is gonna cost $3000 and $1000 respectfully.

Why can't we all just get along for the benefit of everyone.

But I guess spoiled children will always squabble with each other.

Pitiful:(
 
And now that $2,000 GPU or $800 CPU is gonna cost $3000 and $1000 respectfully.

Why can't we all just get along for the benefit of everyone.

But I guess spoiled children will always squabble with each other.

Pitiful:(
If you look at profit margins, doing business with China has nothing to do with making products on the consumer end cheap.
 
Well, that will show the chinese! Good for the US and its tech embargoes, it was about time it showed China that... well, that... They know what the lesson is, that'll show them!

On the one hand, China now knows the power of having so many natural ressources that everybody else needs, and also this has boosted their investments into reducing their dependency on western tech: it's a glorious win for the US.

U-S-A, U-S-A!
 
At the end of the day, everyone loses here. You may think it is a great idea to mine in US or anywhere else since it creates job. But consumers are the one paying for the job creation because you are going to pay more for it.
 
IMO, China is acting like an Addict. They are addicted to the monetary influx they have gotten since the west normalized relations with them. Now, since the restrictions the west has placed on them are being felt right where it hurts, they think they are fighting back. This will only drive the west to other sources - including the USA mining and refining its own materials.

Its time the west divorced themselves from this addict, breaks out of the illusion of "cheap," and relies on itself for semiconductor minerals mining/refinement instead of relying on the addict down the street.
If you look at profit margins, doing business with China has nothing to do with making products on the consumer end cheap.
IMO, looking at Apple is all we need to do for an example of that.
 
So this geopolitical move could be a double-edged sword for the communist nation in the long run.
I would say the same applies to western countries cutting China off from technologies. China will just create homegrown competitors. It might take a decade or two, but they'll catch up because they are highly motivated to do so (and they'll have help from the Chinese government), and then western companies will have not only lost sales but they'll have more competition (which frankly would benefit the average consumer).

I'm not sure I understand what the endgame is in all this. China's response makes sense as simply retaliatory. I don't understand the arguments like "China could be using advanced chips to design nuclear weapons". Like, who cares? China could develop the most advanced nuclear bomb in the world and it wouldn't change a thing: mutually assured destruction didn't end with the cold war.

The only argument that makes sense to me is playing the long game: an attempt to keep western civilization technologically ahead of China by waging this economic war. In that it is reminiscent of the age-old imperialism from the times of American and European expansion. It might work. It might bring jobs back to the U.S. But it will harm the average citizen. For the Chinese it will make it harder to access cutting edge technology. For westerners it will make consumer products more expensive and, depending on these export bans, could cripple certain products availability altogether, not unlike what we've seen in the pandemic supply chain woes.

America set China up for success (as a counter-balance to the Soviet Union during the Cold War), and now that they've proven they can succeed America is scared of that success. America hasn't yet learned from its mistakes with N. Korea, and it's making the same ones with China. If you want to stop N. Korea from developing nukes: you remove the reason they are going after them in the first place (a state of "conflict" between them and the U.S./S. Korea.) If you want to stop China from rivaling the U.S., you establish diplomatic ties like what exists between the U.S. and the E.U.: strong economies, but friendly and cooperative towards each other. You don't encourage them to become rivals by forcing them to build their own products, supply lines, and capabilities.

Politically, it makes a lot more sense, and seems a lot more beneficial in the short and long run, for both sides to get back to the negotiating table and hammer out long term diplomatic ties.

What am I missing?
 
Mine in the USA

Oh no! We can't do that! Global warming, climate change, climate emergency!
Cripple the west, but China can do whatever it wants and become the dominate nation in the world.
THAT should scare everyone.
 
"Chinese companies interested in doing business abroad need to secure a proper export license from Beijing authorities. "Pure" germanium and gallium export, as well as export of any product which includes the two elements, are affected by the new restrictions. "

Another words, the west is f****d...!
 
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