If China Stops The Supply Of Raw Materials Used To Make Chips, The Entire World Will Suffer

China’s foreign shipments of the minerals reached zero just one month after it declared it would restrict the exports of germanium and gallium, two elements required for producing semiconductors. The limitations are a harsh message that China has a potent weapon it may use in the developing trade fight over the future of innovation, despite Beijing’s claims that it has since authorized certain export licenses. The restrictions followed restrictions on chip and chip manufacturing equipment shipments to China by the United States, Europe, and Japan in an effort to deny China access to vital military technology.

How severe the limits would be remains to be seen. The supply chain for the immediate customers will be disrupted if China ultimately decides to prohibit a significant proportion of exports, according to Xiaomeng Lu, director for geotechnology at Eurasia Group.

China produces the two elements with a close to complete monopoly. According to the US Geological Survey (USGS), it produced 98% of the world’s gallium and 68% of the refined germanium last year.

Although the US and its allies have options, building a separate supply chain for processing gallium and germanium might cost a “staggering” $20 billion, according to Marina Zhang, an associate professor at the University of Technology Sydney. And its development can take years.

She stated in July that developing refining techniques and infrastructure for processing gallium and germanium will take time, especially in light of the environmental effects of their mining and extraction.

But doing so might be the only viable choice.

China’s Hegemony

For at least ten years, China has controlled the production of both substances.

A delicate, silvery metal, gallium is simple to cut with a knife. It is frequently employed to create compounds that can be utilized to create radio frequency chips for satellite communication and mobile phones.

Other Vendors

However, there are other vendors.

The USGS estimates that in 2022, Russia, Japan, and Korea together produced 1.8% of the world’s gallium. Teck Resources, a Canadian company, is one of the world’s biggest producers of germanium. A leading producer of germanium compounds and alloys on the international market is the American company Indium Corporation.

And 5NPlus in Canada and Umicore in Belgium both make both components.

But “it would take time to bring online alternative sources of supply,” “Chip War” author and economic historian Chris Miller told CNN.

It could also be pricey.

Increasing Costs

Recycling is an additional choice.

A program to recycle optical-grade germanium used in missile systems was launched by the US Defence Logistics Agency last year. No germanium or gallium was sold outside of China in August. The Commerce Ministry reported that it has authorized some export licenses for Chinese businesses, so the numbers might increase in September.

Manthey predicted that the two elements’ initial pricing would rise.

According to ebaiyin.com, a Chinese metal trading service website, gallium prices were 1,965 yuan ($269) per metric tonne on Tuesday, up more than 17% from June 1.

During that time, germanium prices rose by about 3%.