![What are gallium and germanium and why is China restricting their exports?](https://image.cnbcfm.com/api/v1/image/107266456-16884600871688460084-30156906632-1080pnbcnews.jpg?v=1688462309&w=750&h=422&vtcrop=y)
China is curbing exports of two area of interest metals which can be key to electronics and semiconductor production because the tech battle with the US and Europe intensifies.
Germanium and gallium are the 2 metals in focus.
But what and how crucial are they?
Why does China impose export restrictions on metals?
China and the US are embroiled in a tech trade war that has been escalating since 2019. The US has used trade blacklists and sweeping export restrictions to chop China off from key technology components and semiconductors or integrated circuits.
These critical pieces of technology have turn into the focus of the battle between the 2 superpowers.
To date, China hasn’t taken much retaliation, but in May it called US microprocessor company Micron a “serious security risk.” Now Beijing is looking for areas where it has some strength – metals and materials utilized in electronics and semiconductors.
China’s commerce ministry said Monday that latest regulations would require exporters of gallium and germanium to acquire licenses to move the metals. Beijing introduced the brand new rules for national security reasons.
What is germanium and gallium?
Germanium and gallium are metals that don’t occur naturally. As a substitute, they’re produced, normally as a by-product of refineries of other metals.
Germanium, a silvery-white metal, is produced as a by-product of zinc production. One other soft, silvery metal, gallium, is a byproduct of the processing of bauxite and zinc ores.
What are germanium and gallium used for?
Germanium has several applications, including solar products and fiber optics. The metal is transparent to infrared radiation and might be utilized in military applications comparable to night vision goggles.
Solar panels containing germanium have applications in space.
Gallium is used to provide the chemical compound gallium arsenide, which may, for example, make radio frequency chips for cell phones and satellite communications. This compound is also a key material in semiconductors.
Which country produces metals?
Based on the Critical Raw Materials Alliance, an industry organization, China produces 60% of the world’s germanium and 80% of gallium.
The production of gallium arsenide is complicated and only a couple of corporations on the earth can do it. One is in Europe and the others are in Japan and China, says the CRM Alliance.
How vital are Chinese curbs?
“A warning shot, not a fatal blow,” Eurasia Group wrote in a Monday memo.
“Nonetheless, the latter measures are more limited in scope, and while the brand new rules require Chinese exporters to acquire licenses upfront, no language robotically blocks exports to certain countries or end users.”
The US and Europe don’t import huge amounts of those materials. Based on government records, the US received $5 million in gallium metal and $220 million in gallium arsenide in 2022.
Based on S&P Global Market Intelligence data, germanium consumption was higher, with the country taking in $60 million of the metal, while the EU imported germanium for $130 million in 2022.
Other countries are also capable of produce these metals. Belgium, Canada, Germany, Japan and Ukraine can produce germanium. Meanwhile, Japan, South Korea, Ukraine, Russia and Germany produce gal.
There are also potential substitutes for these metals.
China’s scale has allowed them to provide them at a lower cost than elsewhere, but Eurasia Group notes that Beijing’s moves may have “a limited impact on global supply given the goal range.”
“This is a bull’s-eye to remind countries including the US, Japan and the Netherlands that China has options to retaliate, thus stopping them from imposing further restrictions on China’s access to high-end chips and tools,” Eurasia Group he said.