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CNN
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Just one month after China announced it would curb exports of germanium and gallium, which are essential for semiconductor manufacturing, overseas shipments of the material have dropped to zero.
The Chinese government has since approved some export licenses, but said the restrictions were a severe warning. That means China has a powerful weapon at its disposal in an escalating trade war over the future of technology. The restrictions come after the United States, Europe and Japan restricted the sale of chips and chip-making equipment to China, cutting off access to key technologies available to the military.
“It is still too early to tell how strict the restrictions will be. [But] If China were to block large exports, it would disrupt the supply chain for consumers in the near term,” said Xiaomeng Lu, director of geotechnical engineering at Eurasia Group.
China enjoys almost exclusive production of these two elements. Last year, it accounted for 98% of the world’s gallium production and 68% of its refined germanium production, according to the US Geological Survey (USGS).
Associate Professor Marina Chan from the University of Technology Sydney said the US and its allies have alternatives, but building an independent supply chain for gallium and germanium processing would cost more than $20 billion “astounding.” ” Investment may be required. And it can take years to develop.
“Refining technology and facilities to process gallium and germanium cannot be built overnight, especially given the environmental impacts of gallium and germanium extraction and mining,” she wrote in July.
But there may be no other choice but to do so.
Although these minerals only account for “hundreds of millions of dollars” in global trade, they are critical to the supply chains of the international semiconductor, defense, electric vehicle and communications industries, each worth hundreds of billions of dollars, Zhang said. .
China has monopolized the production of both factors for at least a decade.
Gallium is a silvery, soft metal that can be easily cut with a knife. It is often used to make compounds that can make radio frequency chips for mobile phones and satellite communications.
Germanium is a hard, gray-white, brittle metalloid used to make optical fibers that can transmit light and electronic data.
I can’t find either By ourselves in nature. They are usually formed as a by-product of mining the more common metals, primarily aluminum, zinc, and copper.
Processing the elements can be “expensive, technically difficult, energy-intensive and polluting,” said Ewa Mansey, a commodity strategist at ING Group.
“China dominates the production of these two metals not because they are rare, but because it has been able to keep production costs fairly low, allowing other manufacturers to match the country’s competitive costs. That’s because we haven’t been able to match that.”
From 2005 to 2015, China’s production of low-grade gallium soared from 22 tons to 444 tons, according to data compiled by the Center for Strategic and International Studies in Washington.
Analysts at the think tank said China is in a position to lead the world. aluminum industry This has enabled us to establish an overwhelming share of the world’s gallium production.
Additionally, the Chinese government has implemented strategic policies to expand production, such as requiring domestic aluminum producers to build gallium extraction capacity.
This is why gallium production has become virtually uneconomical outside of China over the past decade.
Between 2013 and 2016, Kazakhstan, Hungary, and Germany all suspended primary production of gallium. (Germany has announced that it will restart production in 2021 due to rising prices.)
However, alternative suppliers do exist.
Russia, Japan and South Korea produced a combined 1.8% of the world’s gallium in 2022, according to the USGS. When it comes to germanium, Canada’s Teck Resources is one of the world’s largest producers. The American company Indium Corporation is also the world’s leading manufacturer of germanium compounds and alloys.
And Canada’s 5NPlus and Belgium’s Umicore generate both elements.
But economic historian Chris Miller, author of “The War on Chips,” told CNN, “It’s going to take time to bring alternative sources of supply online.”
It can also be expensive.
Gregory Allen, director of CSIS’s Wadhwani Center for AI and Advanced Technologies, said mining companies around the world could get into the business of selling germanium and gallium if China tries to cut off supplies.
“Although this is not immediate, some global mining and refining companies have indicated their intention to do so.”
Russia’s state-owned conglomerate Rostec told Reuters in July it was ready to increase production of germanium for domestic use after China announced export curbs.
Netherlands-based Nirstar also said it was considering potential germanium and gallium projects in Australia, Europe and the United States.
“Even if users run out of supplies of these minerals, they can replace gallium with silicon or indium in the wafer fabrication process,” Eurasia Group’s Lu said.
Zinc selenide is a less functional but functional alternative to germanium in certain applications, she added.
Recycling is also an option.
Last year, the U.S. Defense Logistics Agency introduced a program to recycle optical-grade germanium used in weapons systems.
“Factory floor scrap is already a source. Germanium scrap is also recovered from decommissioned tanks and other military vehicles,” Lu said.
In August, China did not sell germanium and gallium outside its borders. That number could bounce back in September after the Commerce Department announced it had approved some export licenses for Chinese companies.
Initially, prices for these two components are likely to rise, Manthey said.
Gallium prices stood at 1,965 yuan ($269) per tonne on Tuesday, up more than 17% since June 1, according to Chinese metals trading service website ebaiyin.com.
Over the same period, germanium prices rose by about 3%.
“Rising prices will make production more cost-competitive again in countries such as Japan, Canada and the United States, increasing competition and thus reducing China’s dominance in both markets,” Manthey said. Ta.
“Building processing plants will take time, but over time the market and supply chain will adjust,” he added.