In order to safeguard national security and interests, China's Ministry of Commerce and the General Administration of Customs issued an announcement on July 3, deciding to implement export controls on two key metals, gallium and germanium, from August 1, 2023.
According to Reuters local time on July 6, when asked about the strategic reserves of these two key metals on the same day, a spokesman for the US Department of Defense said that the United States has a strategic reserve of germanium, but currently has no reserve of gallium, adding: "The (US) Department of Defense is actively taking steps to use the powers of Chapter III of the Defense Production Act (DPA) to increase domestic mining and processing of key materials in the microelectronics and space supply chain, including gallium and germanium." ”
On July 5, local time, a spokesman for the U.S. Department of Commerce said that the United States "firmly opposed" China's announcement of export controls on gallium and germanium, key metals needed to produce semiconductors and other electronic products, and added that the United States would consult with allies and partners to resolve the issue.
Some US experts believe that China's export control of gallium and germanium is likely to "slow down the production efficiency of the US Department of Defense" or "increase costs"; Others argue that while U.S. defense companies tend to buy materials needed for critical systems in advance, so this export control has little impact in the short term, the Pentagon will eventually have to look for alternative sources of gallium and germanium.
Screenshot of the Reuters report
Gallium, germanium, etc. are important raw materials for chip manufacturing, and these two metal minerals occupy a leading position in the world in terms of reserves and exports. Reuters also added that germanium is used in high-speed computer chips, plastic products and military applications, such as night vision equipment and satellite image sensors; Gallium is used in radar and radiocommunication equipment, satellites and LEDs.
Arun Seraphin of the Institute for Emerging Technologies (ETI) of the Defense Industry Association (NDIA) said that while major U.S. defense contractors such as Lockheed Martin may not buy gallium and germanium directly, they may buy semiconductors through suppliers who source gallium and germanium from China.
He argued that China's imposition of export controls on the supply of gallium and germanium could "slow down the productivity of U.S. Department of Defense systems" or "increase costs."
Dak Hardwick, vice president of international affairs at the American Aerospace Industry Association (AIA), believes that Chinese export controls may have little impact on U.S. defense companies in the short term, which tend to buy materials needed for critical systems in advance.
Hardwick also admitted that the Pentagon will eventually have to find alternative sources of gallium and germanium. "Whether it's direct mining, direct manufacturing, direct refining or production, or recycling from waste equipment." Chinese export controls could also spur U.S. lawmakers to increase investment in key minerals, he added.
Infographic: Gallium, an important rare metal
L3Harris, a U.S. defense company in the aerospace sector, said it had "made critical updates to the supply chain" to avoid disruptions, but did not specifically respond to the impact of China's latest export control measures.
According to a 2020 report by the Institute of Mineral Resources of the Chinese Academy of Geological Sciences, the world's total gallium reserves are currently about 230,000 tons, and China's gallium metal reserves rank first in the world, accounting for about 80%-85% of the world's total reserves. According to a statistic released by the US Geological Survey in 2016, the world's proven germanium reserves are only 8600 metal tons, of which the United States accounts for 45% of the world, followed by China, which accounts for 41% of global germanium reserves.
Hong Kong's South China Morning Post said that China is also the largest producer of gallium and germanium, accounting for more than 95% of the world's gallium production and more than 67% of the world's germanium production. Reuters noted that according to customs data, in 2022, the largest importers of Chinese gallium products were Japan, Germany and the Netherlands; The largest importers of germanium products are Japan, France, Germany and the United States.
A Chinese germanium producer revealed that it received a large number of inquiries from buyers in the United States, Japan and Europe after the introduction of the restriction order, and product quotations soared overnight. On the other hand, after China's export control measures were issued, the reaction of enterprises and governments in some countries is noteworthy.
California-based AXT, which has production facilities in China, said in a statement on its official website on July 3 that its Chinese subsidiary, Beijing Tomei Crystal Technology Co., Ltd., will immediately begin applying for a license to continue exporting gallium and germanium substrate products from China. The company will announce further details when it holds a second-quarter report conference call on August 3.
As major importers of the two metals, the governments of Japan and South Korea have responded by saying they are seeking countermeasures. Japanese Minister of Economy, Trade and Industry Yasuminoru Nishimura said that Japan does not believe that China's move is a countermeasure to Japan's control of semiconductor manufacturing equipment exports in May. The South Korean Ministry of Industry also held an emergency meeting to assess the impact of the matter and hoped to consult and communicate with the Chinese side.
At the same time, the Netherlands, which recently included some semiconductor equipment in export control despite China's opposition, seems to be unable to sit still. The Dutch government claimed on July 4 that the EU must respond to China's export controls. The European Union said earlier in the day it hoped China would impose export controls based on "clear security concerns." Robert Habeck, Germany's deputy chancellor and minister of economy and climate protection, claimed that any expansion of regulations on materials such as lithium would be "problematic."
Reuters pointed out that China has stated that this move is for the consideration of protecting national security, but some economic analysts believe that this move is China's response to the United States' escalating curbing of its technological development and progress, just before the eve of US Treasury Secretary Yellen's visit to China.
According to the report, this marks the "new page" in Sino-US relations after escalating in recent years on issues such as trade tariffs, coronavirus traceability, cybersecurity, espionage charges and technological competition.
Chinese Foreign Ministry spokesman Mao Ning pointed out on July 4 that China has always been committed to maintaining the security and stability of the global production and supply chain and has always implemented fair, reasonable and non-discriminatory export control measures. The Chinese government's export control of relevant items in accordance with the law is a common international practice and does not target any specific country.
Chinese Foreign Ministry spokesman Wang Wenbin further stressed on July 5 that gallium and germanium-related items have obvious dual-use properties, and it is an international practice to impose export controls on gallium and germanium-related items. EU members also impose export controls on some items, and the Chinese government implements export controls on relevant items in accordance with the law to ensure that they are used for legitimate purposes and are not targeted at any specific country.
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