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China restricts exports of two crucial metals for chipmaking

  • China will limit exports of gallium and germanium – vital metals for chipmaking – from August 1.
  • Authorities said the move was to “safeguard national security and interests”.
  • The export restriction is seen as a retaliatory move by Beijing amid a flea war with the West.

China and the United States are increasingly trapped in a chip war that has escalated since October.

A recent move by China to restrict the export of two little-known metals has once again sent the semiconductor industry into a tailspin.

In a notice on Monday, China’s Commerce Ministry and Customs Department said they planned to control exports of two metals – gallium and germanium – and several of their compounds from August 1 to “safeguard security and national interests”.

Exporters can apply for export licenses if they want to continue shipping products out of China, according to the notice.

Gallium and germanium are used in chipmaking, electronics and solar products, so news of the export restriction is seen as retaliatory action by Beijing in the country’s tech war with the West .

The notice comes just days after the Netherlands restricted the sale of high-end chipmaking equipment overseas – a move that appears to be aimed at China.

The Biden administration also wants to restrict Chinese companies’ access to US-based cloud providers, The Wall Street Journal reported on Tuesday, citing people familiar with the matter.

In October, the United States began limiting sales of advanced semiconductors and chipmaking equipment to China.

“This is a butt shot intended to remind countries like the United States, Japan and the Netherlands that China has options for retaliation and thereby deter them from imposing further restrictions. Chinese access to high-end chips and tools,” analysts at Eurasia Group, a risk advisory firm, wrote in a Tuesday note seen by Insider.

With U.S. Treasury Secretary Janet Yellen due in Beijing for a three-day visit on Thursday, Chinese authorities could use export restrictions as leverage in talks, analysts said.

Industry players globally are now assessing their risks for export controls, Reuters reported on Tuesday.

Gallium and Germanium have limited alternatives and are only found naturally in trace amounts.

Instead, they are commercially sourced in large quantities as by-products of other industrial processes. China accounts for around 80% and 60% of global gallium and germanium production, respectively, according to Critical Raw Materials Alliance, a European industry association.

“There is no major global shortage of gallium or germanium. China dominates the production of these two metals not because they are rare, but because it has managed to keep their production costs quite low. and that manufacturers elsewhere have not been able to match the country’s production at competitive costs,” wrote Ewa Manthey, commodity strategist at Dutch bank ING, in a Tuesday note.

She added that mining the two metals can be expensive and technically difficult, and therefore very few facilities outside of China are capable of producing gallium and germanium.

Manthey expects prices for both metals to rise in the short term, although other manufacturers – including those in North America and Europe – would likely increase production in the long term, should prices remain. students.


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