Chinese Retaliates by Imposing Export Restrictions on Semiconductor Manufacturing Materials

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In response to semiconductor restrictions imposed by the US, China has announced its own measures to limit the export of gallium and germanium, two vital metals used in chipmaking and communication devices. China’s Ministry of Commerce and Administration of Customs stated that permits must be obtained from the ministry starting August to export these materials, with the aim of protecting national security and interests. Gallium and germanium are alternative options to silicon wafers, serving specialized applications and military/communication equipment components.

This move from China comes shortly after the Netherlands announced its plans to restrict the sale of high-end chipmaking equipment abroad, affecting ASML’s immersion lithography machines. These Dutch restrictions, though officially “country neutral,” are expected to be in effect from September 1 and follow similar limitations imposed by the US and Japan on semiconductor manufacturing equipment. Moreover, the US has also blocked the export of advanced chips necessary for artificial intelligence to China, and there are discussions of further export limits on AI chips manufactured by Nvidia and AMD.

China’s response to these actions against its tech industry includes the ban on US memory chipmaker Micron’s products in “critical national infrastructure” implemented in May. However, this latest export restriction by China on gallium and germanium, as the world’s leading producer of these materials, may potentially disrupt global production and increase prices in industries such as technology, telecommunications, energy, and automotive.

Gallium, which is used in compound semiconductors, offers enhanced operational speed with lower power consumption and greater heat resistance. It is currently widely used in 5G network base station chips, military radar systems, and electric vehicle chargers. Germanium, on the other hand, is often added in small amounts to silicon to enable more advanced chip structures. It finds applications in fiber-optic cables, solar panels, LEDs, and military thermal imaging cameras.

While some Chinese businesses are concerned about the potential negative impact on their operations, particularly during an economic downturn, the overall impact on the international market is expected to be limited in the short term, according to an executive from a Chinese semiconductor material company.