The first test appeared... Germany quickly changed its tune and just claimed to export to China in an economically independent manner
According to the website of the German newspaper Le Monde on August 1st, the German government has recently passed a new strategy towards China, aiming to become more economically independent of China. Now, the first practical test has emerged: the Chinese government has implemented export controls on germanium and gallium, two substances. Germany heavily relies on China for the supply of these two rare metals.
The report raises a question: Does Europe have enough time to reduce this dependence in the medium term? How can China firmly implement its strategy towards China when it has an advantage?
The latest research on key raw materials by the European Union shows that the EU heavily relies on China's gallium and germanium. China has implemented export controls on these two metals since August 1st.
The Chinese government stated that implementing the new regulations is "to safeguard national security and interests.".
The report states that the United States has blacklisted a large number of Chinese companies to prevent them from obtaining American chips and other cutting-edge technologies, such as preventing the Chinese government from manufacturing high-performance computers for defense purposes. Japan and the Netherlands have also restricted the export of products required for manufacturing semiconductors to China. Gallium and germanium are China's weapons in the increasingly tense chip war.
▲ Information pictures: Visitors are visiting the China Germanium Industry Museum to learn about the application of germanium in solar cells.
The report also stated that there is one country that relies more on China than the United States for the supply of these two rare metals, and that is Germany. According to trade data for 2022, Germany is one of the largest importers of these two materials. The German automotive industry is particularly concerned about the latest developments and is concerned about disruptions to the supply chain.
After the implementation of export controls, Chinese businesses exporting to Germany first need to obtain a license.
The report points out that in order to avoid disruptions to the supply chain, Germany must establish good relations with China. However, the recent strategy proposed by the German government towards China is not aimed at pleasing China. Not only did it mention several sensitive topics, but it also pointed out that Germany should be more economically independent of China, with the key word being "risk reduction". German companies are required to diversify their supply chains.
At the same time, the Nihon Keizai Shimbun reported on August 2 that Japanese enterprises are paying attention to China's restrictions on the export of gallium and other semiconductor materials since August 1. The position of the Chinese Ministry of Commerce is not to limit the quantity of exports or prohibit exports, but to grant permission if it meets the regulations. Most companies adopt a wait-and-see attitude, but there are also concerns that future procurement may be affected.
According to reports, China has implemented export controls on rare metal gallium and germanium related products since August 1st. Japan is the world's largest consumer of gallium, with over 40% of its domestic supply coming from waste materials and nearly 60% relying on imports. About 70% of the import volume comes from China. Japan's dependence on Chinese gallium is about 40%.
If procurement stagnates, it may have an impact on related industries in Japan. However, most companies temporarily adopt a wait-and-see attitude.
After all, China does not have a "ban" on exports. It is reported that if the application content of export enterprises does not touch on national security issues, they will be granted permission.
The report also stated that in terms of export management, Japan also strictly managed the export of semiconductor materials to South Korea in 2019.
But concerns still persist. This is because the United States and Japan have strengthened restrictions on the export of advanced semiconductors to China, leading to increasingly strong resistance within China towards the United States and Japan.
Some Japanese companies are concerned about China's future operational mechanism.
A new crystal technology company located in Kanayama City, Saitama Prefecture is developing a new generation of power semiconductor materials, including wafers made from gallium oxide. If electric vehicles use this component, it can reduce power consumption and extend range.
According to relevant personnel from the company, the current situation is that "the annual procurement plan has been completed. I heard from the raw material manufacturers that the necessary procurement quantity can also be stably supplied after next year.". On the other hand, the company is concerned that raw material prices will rise in the future.
