China's gallium and germanium controls: what they mean and what could happen next

Starting this August, China plans to limit the export of gallium and germanium, which are crucial materials in the production of semiconductor chips. Given China's significant control over the supply of these elements, exporters will now be required to obtain special permits in order to transport them out of the country. This decision carries the potential to negatively impact multiple tech manufacturers in the Western world that heavily rely on gallium and germanium as key components in their product manufacturing processes.

The shift is said to be a result of limitations imposed by Western countries on essential equipment needed for producing semiconductor devices (as mentioned in a previous article on The Conversation). Most significantly, the US CHIPS and Science Act of 2022 restricted the export of advanced microchips and technology to China, which could impact Beijing's ability to engage in high-performance computing for defense purposes. Additionally, countries like Japan and the Netherlands have also enforced their own limitations.

So just how significant are the recent Chinese limitations and what consequences can be expected?

Gallium And Germanium's Importance

Silicon, the most commonly utilized substance in semiconductors, is incredibly abundant. However, germanium and gallium possess distinctive characteristics that are challenging to imitate, making them ideal for specific niche uses. These elements find their way into numerous devices including smartphones, laptops, solar panels, medical equipment, and even defense applications.

Both components are essential for the future progress of technology. Germanium is especially valuable in space-related fields like solar cells due to its higher resistance to cosmic radiation in comparison to silicon. As a result, increasing the utilization of germanium is proposed as a solution to overcome the current limitations of silicon that are reached in certain technologies. Presently, it is employed in limited amounts within semiconductors to enhance electron flow and thermal conductivity.

Regarding gallium, the majority (95%) of its utilization lies in a substance named gallium arsenide. This particular material is employed in semiconductors, offering superior efficiency and reduced energy consumption compared to silicon. Such semiconductors find application in various products, including blue and violet LEDs as well as microwave apparatus.

On the other hand, gallium nitride is employed in the production of semiconductors, which are utilized in various components for electric vehicles, sensors, advanced radio communications, LEDs, as well as Blu-Ray players. The demand for gallium nitride is projected to witness substantial growth in the coming years.

Both gallium and germanium are classified as critical elements by the European Union and United States. In terms of manufacturing interests, the United Kingdom deems gallium to be of utmost importance, while germanium is regarded as comparatively less significant.

Origin Of Them

Approximately 60% of the world's germanium supplies are under the control of China. This element is obtained through two primary methods: as a by-product of zinc production and from coal. These two sources contribute about 75% and 25% respectively to the overall supply. China holds a significant dominance in the germanium acquired from zinc production. As an alternative source, the United States possesses deposits in Alaska and Tennessee, along with the ability to refine germanium in Canada. However, currently, the US still relies on imported germanium for more than 50% of its needs.

There are various disadvantages associated with obtaining germanium from coal. Russia and Ukraine are two major suppliers, but due to the ongoing war, the availability of germanium from these countries to the western markets has been affected. In the period between 2017 and 2020, Russia accounted for 9% of the germanium demand in the US. However, it is highly probable that this supply has been halted. In an attempt to counter the limitations imposed by China, Russia intends to boost its germanium production to meet the needs of its own domestic market. While this might alleviate the global demand to some extent, it is unlikely to directly help the western markets.

The reliance on the power sector also affects the availability of germanium extracted from coal, as specific coal types that contain this element are utilized for generating energy. Moreover, acquiring germanium from coal will pose more challenges as a significant portion of the global community strives to eliminate coal-based energy production, resulting in a potential scarcity of this resource.

China is responsible for approximately 80% of the global gallium supply, primarily sourced from the production of aluminium. The availability of gallium is not actually limited, but prior to the implementation of new regulations, its supply was constrained due to inadequate production capacity.

Gallium can also be acquired through the reprocessing of semiconductor wafers, which are slender fragments of semiconductors utilized in electronic circuits. However, after these circuits are incorporated into finished goods, the amount of gallium present in each individual item is tremendously minute, posing a significant challenge for recycling. In a study published in Nature Communications in 2022, it was observed that gallium is rarely subjected to functional recycling once it has reached its end-state as a final product.

The complete effects of China's recent export regulations hinge on various elements, such as the extent of the implemented restrictions and how Western governments and businesses react. Currently, it seems probable that these restrictions will result in increased prices for gallium and germanium, along with lengthier shipping durations.

This has the potential to increase costs and pose challenges for Western corporations in manufacturing electronic gadgets, consequently resulting in elevated prices for consumers. Moreover, it may create obstacles for Western companies to effectively compete against their Chinese counterparts. Similar to the notable impact on the technology industry caused by the global shortage of microchips amid the COVID pandemic, this situation could significantly affect the global economy.

It is challenging to anticipate the future implications of the restrictions as numerous variables come into play. The presence of element reserves might provide some relief, as the United States has verified its supply of germanium but has not disclosed any stockpiling of gallium.

Manufacturing companies based in the West might face the need to expand their supply networks and acquire parts that include elements sourced from countries that have export agreements with China. Consequently, this situation could result in escalated expenses and heightened intricacy.

An alternative option is to boost the output from different sources. Previously, germanium was extracted from minerals found in Germany, Latin America, and Africa, so these possibilities may resurface. Moreover, there is a chance to invest in exploring devices that are not as dependent on these essential resources, yet it would require patience for positive outcomes to emerge.

Without a doubt, the action represents a major increase in the technological conflict between China and Western countries. The worry is that it may escalate even more: China holds a monopoly over essential resources called rare earth metals, along with other materials crucial for the transition to clean energy. Even prior to the recent increase in tensions, China had utilized its control over specific resources as a bargaining chip in trade disagreements.

This recent development is quite worrying, to say the minimum. When the global challenges faced by mankind are more significant than ever, the rise of a fresh form of resource nationalism is the least desirable occurrence.