China’s Ministry of Commerce warned on Monday that it would impose export restrictions on two metals that are essential for the production of semiconductors, sending a message to Europe and the US in the developing trade spat over access to microchips.
Due to concerns about national security, exporters will be forced to get a license as of August 1 in order to transport certain gallium and germanium compounds, according to China’s commerce ministry. Applications for export licenses must contain details about importers, final consumers, and the planned use of these metals.
This action is a part of a growing struggle for technical superiority on a worldwide scale, with China serving as the world’s major supplier of both metals, as this year’s European Union report on essential raw resources proved. As U.S. Treasury Secretary Janet Yellen gears up to visit China later this week, it comes at a vital moment.
The planned breadth of these limits is anticipated to have a little influence on the world supply, according to analysts from Eurasia Group. They see it as a warning shot to nations like the US, Japan, and the Netherlands, informing them of China’s possibilities for retaliation and hoping to prevent future limitations on Chinese access to sophisticated tools and chips. It is significant that there are no explicit prohibitions against any particular nations or end-users.
China’s Ministry of Foreign Affairs spokeswoman Mao Ning reiterated that the government’s export curbs are legal and are not directed at any particular country during a routine news briefing.
Tuesday saw a sharp spike in share prices for Chinese germanium producers after the news as investors anticipated significant hikes in the price of the raw materials. Significant increases were made by Yunnan Chihong Zinc & Germanium and Yunnan Lincang Xinyuan Germanium Industrial.
China’s limitations are anticipated to have a minor short-term effect, according to representatives from Taiwan’s foreign ministry and the industry ministry of South Korea. There are worries that the limits might eventually grow to encompass other materials.
Compound semiconductor wafers for electrical circuits, semiconductors, and light-emitting diodes are made from the soft silver metal gallium. For the production of fiber optics utilized in data and information transmission, germanium is necessary.
China now commands the market for essential commodities thanks to its supremacy in mining and processing activities, governmental subsidies, and the ability to export processed minerals at a price that is competitive. Nevertheless, prior efforts to impose export restrictions have decreased supply globally and increased costs, resulting in international competition and promoting mining and processing endeavors outside of China.
China and the United States have been at odds since the latter implemented extensive regulations in October to stop China from receiving imports of critical semiconductor equipment and chips. China’s plans to develop its domestic technology industry may be hampered by these regulations. Additionally, the United States has pushed important chip-producing countries and allies, including the Netherlands and Japan, to enact their own export controls.
A well-known semiconductor business, ASML, was essentially prevented from selling to China as a result of recent new export restrictions the Netherlands had put on sophisticated semiconductor equipment. The Dutch restrictions, nevertheless, do not directly include ASML.
Several nations are working to safeguard their own supply chains and support their local chip manufacturers in the midst of these trends, concentrating on their historic advantages. The Japanese government-backed firm has suggested a large takeover of semiconductor materials company JSR.
Semiconductors are essential for the development of artificial intelligence and are used in a wide range of modern devices, including refrigerators, vehicles, and smartphones.