Foreign media: China sends a signal of "having a card in hand", China controls the export of important raw materials for chips | metals | the United States | China

The Chinese Ministry of Commerce and other departments announced on the 3rd that starting from August 1st, Chinese exporters need to obtain approval to ship certain gallium and germanium metal products overseas to "safeguard security and national interests.". Gallium and germanium are key raw materials in high-tech fields such as chips. Some public opinion believes that China intends to respond to the US and the West's containment of China in the high-tech field.

Chinese Foreign Ministry spokesperson Mao Ning stated at a press conference on the 4th that China has always been committed to maintaining global supply chain security and stability, and has always implemented fair, reasonable, and non discriminatory export control measures. The Chinese government implements export controls on related items in accordance with the law, which is an international practice and does not target any specific country. On the 5th, Chinese Foreign Ministry spokesperson Wang Wenbin reiterated China's relevant position.

"The backbone of the electronic industry"

Chinese authorities announced on the 3rd that they will implement export controls on gallium and germanium related items, which has attracted high attention from the outside world. Why do export controls involve these two metals and what role do they play in the high-tech field?

According to American financial media CNBC, gallium and germanium are rare metals with extremely low abundance in nature and are typically refined as by-products of other metals. For example, soft silver metallic gallium is a byproduct of bauxite and zinc ore processing, while silver white germanium is a byproduct of zinc production.

Gallium and germanium are both extremely important scarce strategic resources. Gallium with low melting point and high boiling point is known as the backbone of the electronic industry. Its high conductivity, moderate thermal conductivity, and low liquid toxicity make it a key material for semiconductor components. The processed gallium arsenide compound can be used to manufacture radio frequency chips for mobile phones and satellite communications.

Germanium has characteristics such as affinity for iron, sulfur, stone, and organic matter, and is mainly used in industries such as infrared optics, fiber optic communication, and solar cells. The use of night vision goggles, satellite image sensors, etc. in military activities often involves the joining of germanium.

According to industry organization "Key Raw Materials Alliance", China accounts for 80% of global gallium production, with the rest coming from Japan, South Korea, Ukraine, Russia, and Germany. China's germanium production accounts for 60% of the world's total, with the rest coming from Belgium, Canada, Germany, Japan, and Ukraine.

It should be noted that the United States also has domestic reserves of gallium and germanium, and it is also the world's largest producer of germanium resources. But two metals are being developed as strategic reserves for protective purposes.

According to data from the General Administration of Customs of China, from January to November 2022, China exported a total of 89.35 tons of gallium products. In 2022, China exported a total of 43.7 tons of germanium products. The largest importers of Chinese gallium products are Japan, Germany, and the Netherlands. The main importing countries for germanium products are Japan, France, Germany, and the United States.

Hit the pain point of the US side

Reuters views China's move as a response to Washington's containment of China's technological progress. Dai Bite, Chairman of the China International Mining Association from Australia, believes that China has hit the pain point of US trade restrictions.

Triolo, Senior Vice President of Albright Stone Bridge Group in China, an American consulting firm, said that the restrictions may target companies in the semiconductor and defense industries. This sends a signal to the United States that China holds an important position in raw material investment in the semiconductor, aerospace, and automotive industries.

"This is a warning, but not a fatal blow." The US think tank Eurasia Group stated in a report on Monday that this move aims to remind countries including the United States, Japan, and the Netherlands that China has a counterattack option, thereby preventing the West from further restricting China's access to high-end chips and tools.

Analysts believe that firstly, China's export controls are not blind behavior, but rather reasonable and legal. This move is based on the Export Control Law, and its core essence is to maintain national security. The two types of raw materials subject to export controls are closely related to special applications such as military industry. Through the export licensing system, China can clarify the end users and uses of these key metal exports to avoid risks that endanger national security and interests.

In fact, the international community generally regards metals such as gallium and germanium, which have obvious dual-use properties, as strategic minerals. Last August, the Industrial Security Agency of the US Department of Commerce implemented export controls on gallium oxide. EU member states also implement export controls on certain items.

Secondly, in the semiconductor industry downstream of key metals, the United States is increasingly suppressing China, gathering and coercing allies to form a common front. Both Japan and the Netherlands have implemented cooperative measures. Many rare and critical metals in the international market are supplied from China, so China's move is also seen as a "well thought out heavy blow.".

Reuters reported that people are increasingly concerned that China may impose new restrictions on rare earth exports in the next step. China is the world's largest producer of rare earths. 12 years ago, in a dispute with Japan, China restricted rare earth exports.

Is short-term substitution a "fantasy"?

Do major importing countries have alternative solutions after China announces export controls on related items? There are several opinions from the outside world regarding this.

Dai Bite believes that gallium and germanium are just a few rare metals that are very important for a series of technological products, and China is the main producer of most of these metals. "It is a fantasy that another country can replace China in the short or even medium term," he said.

The Nihon Keizai Shimbun said that if it is not possible to purchase gallium from China, it is necessary to find an alternative import source during production. Enterprises are unable to purchase gallium at low prices, which may have an impact on the practicality of these cutting-edge technologies.

Karayanopoulos, CEO of Neo Performance, a Canadian industrial materials company, believes that it will be difficult to meet market demand without China's supply of gallium, but "appropriate industry public policy incentives" may have alternative solutions.

Bloomberg stated that if China's measures lead to a surge in prices, the production of other suppliers will increase to meet demand, and extracting from waste may also be an important source. The United States Geological Survey states that factory waste has accounted for a portion of the supply, and germanium waste can also be extracted from the windows of retired tanks and other military vehicles.

In addition, countries such as the United States and Japan, which heavily rely on China's rare earth resources, are attempting to establish a rare earth supply chain that is not dependent on China by developing domestic resources and investing in foreign mines. Therefore, it is not ruled out that major importing countries such as the United States may seek corresponding alternative solutions.