China is restricting exports of two niche metals critical to making electronics and semiconductors as the technology war with the U.S. and Europe heats up.
Germanium and gallium are two metals that have attracted much attention.
But what are they and how important are they?
Why is China imposing export restrictions on metals?
The U.S. and China are locked in a tech trade war that has escalated since 2019. Trade blacklists and sweeping export restrictions to cut off Chinese supplies of critical technology components and semiconductors or chips.
These key technologies have become the focus of the battle between the two superpowers.
So far, China has refrained from retaliating much, but in May labeled U.S. chip company Micron Technology a “significant security risk.” Now, Beijing is looking for areas where it has some strengths — metals and materials used in electronics and semiconductors.
The new rules will require exporters of gallium and germanium to obtain licenses to transport the metals, China’s Ministry of Commerce said on Monday. Beijing has introduced new rules on national security grounds.
What are germanium and gallium?
Germanium and gallium are metals that do not occur naturally. Instead, they are usually formed as a by-product of other metal refineries.
Germanium is a silvery-white metal that is a by-product of zinc production. Gallium, meanwhile, is a soft, silvery metal that is a by-product of processing bauxite and zinc ores.
What are germanium and gallium used for?
Germanium is used in a variety of ways, including solar products and fiber optics. The metal is transparent to infrared radiation and could be used in military applications such as night-vision goggles.
Germanium-containing solar panels have applications in space.
Gallium is used to make the compound gallium arsenide, which for example makes radio-frequency chips used in mobile phones and satellite communications. The compound is also a key material for semiconductors.
Which country produces metals?
China produces 60 percent of the world’s germanium and 80 percent of gallium, according to the Critical Raw Materials Alliance, an industry body.
The production process of gallium arsenide is complicated, and only a few companies in the world can do it. One is located in Europe, while others are located in Japan and China, the CRM Alliance said.
How big are China’s restrictions?
“This is a warning, not a fatal blow,” Eurasia Group said in a note on Monday.
“But these latest measures are more limited in scope, and while the new rules require Chinese exporters to obtain a license first, there is no language that automatically prohibits exports to specific countries or end users.”
The United States and Europe do not import these materials in large quantities. According to government figures, the US will receive $5 million in gallium metal and $220 million in gallium arsenide in 2022.
In 2022, Germany will import $60 million of germanium, while the EU will import $130 million, according to S&P Global Market Intelligence.
Other countries are also able to produce these metals. Germanium can be produced in Belgium, Canada, Germany, Japan and Ukraine. Gallium is also produced in Japan, South Korea, Ukraine, Russia and Germany.
There are also potential substitutes for these metals.
China’s size allows it to produce these products at a lower cost than elsewhere, but Eurasia Group noted that Beijing’s move “has limited impact on global supply given the scope of the target”.
“This is an arrow shot aimed at reminding countries such as the United States, Japan and the Netherlands that China has retaliatory options, thereby preventing them from imposing further restrictions on China’s access to high-end chips and tools,” Eurasia Group said.
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