09/13/2023
China imposed new export curbs on two critical metals in semiconductor and chipmaking
In July, the Ministry of Commerce in China announced that starting from August 2023, China will impose export controls on two metals, gallium and germanium. Under the new controls, special licenses from MOFCOM are required for firms in China to export these two metals along with their chemical compounds. On the following day, both the United States and the European Commission voiced their opposition and concerns to this plan.
As “minor metals,” gallium and germanium are not typically found on their own in nature but are often the byproducts during the refining process of other mainstream metals, such as zinc and aluminum. Both metals are indispensable for the semiconductor, telecommunication, and electric vehicle industries. By far, China is still one of the most crucial players in the global supply chain of gallium and germanium. It produces 80% of the gallium and 60% of germanium in the world, according to the Critical Raw Materials Alliance (CRMA) industry body.
The primary purpose of this export control remains opaque. In the July announcement, Chinese officials reiterated that the export restrictions don’t target any specific country but are meant to protect China’s national security. However, this policy has been widely considered by politicians and economists as an escalation of the country’s tit-for-tat trade war on technology. This measure appears to be aimed at countries such as the U.S., South Korea and Japan, which have restricted exports of advanced semiconductors and related technology to China. Particularly, to a certain extent, it can be viewed as a retaliation against U.S. trade restrictions aimed at curbing Beijing’s high-technology industries, since it is worth noting that this policy was released coincidentally before the U.S. Treasury Secretary Janet Yellen’s planned visit to Beijing. In the meantime, it can serve as an alarm for other economies participating in the global supply chain of semiconductors.
In the near future, more export control measures are likely to come for both China and the U.S. Following the sweeping trade restrictions last October, which banned the exports of advanced chips and equipment in chip production to China, the Biden administration has already started to consider new curbs on AI chip exports to China amid their concerns that China can use AI chips in weapon development and hacking. And China’s corresponding response is yet to be seen.
