China Escalates Chip Trade War by Limiting Gallium, Germanium

A trade war between China and the United States over the future of semiconductors is heating up after Beijing imposed export controls on two crucial raw materials, gallium and germanium. These materials are essential for the global chipmaking industry.

Last October, the Biden administration introduced export controls that prevented Chinese companies from purchasing advanced chips and chip-making equipment without a license. 

This was seen as a way to safeguard national security interests, given the importance of chips in various sectors, like smartphones, self-driving cars, advanced computing and weapons manufacturing.

However, China viewed this as an early strike in a trade war intended to stymie its growth in the chipmaking industry. China retaliated by initiating a cybersecurity investigation into Micron, a US chipmaker.

The probe resulted in the company being banned from selling to Chinese firms involved in critical infrastructure projects. Now, Beijing has gone a step further by announcing additional restrictions on gallium and germanium. 

According to the US Geological Survey, China is the top producer of gallium and germanium worldwide. It accounts for 98% of global gallium production and 68% of refinery production of germanium.

Market watchers are concerned that these export controls will curtail the artificial intelligence-fueledtechnology boom. With a dwindling supply of these key raw materials, prices will rise and supply chains will stall, putting up barriers to the further growth of many sectors that rely on advanced chips.