On The Radar: Blessed are the Chip-Makers
18 October 2023
The manufacture of semiconductors is one of those subjects usually left to the depths of tech industry magazines, but in the last month or two the semiconductor industry finds itself bound for the headlines.
The reasons? China’s decision a few weeks ago to drastically decrease or even cease exports of germanium and gallium.
China has dominated the production of both elements for more than a decade, controlling nearly all of the world’s gallium production, and around 70 percent of the germanium.
Gallium is a soft metal used to produce compounds used in radio frequency chips for mobile phones and satellite communication systems.
Germanium is a metalloid (a chemical element that behaves somewhat like metal) that is used in the production of optical fibres in data and communications.
Both are formed as a by-product in the production of zinc, copper, and aluminium and China controls the world market primarily because it is able to produce those alloy metals at the most competitive global cost.
The curbs from Beijing came as a reaction to sales restrictions placed on Chinese-made chips by the US, Japan and parts of Europe.
Although the minerals account for only a few hundred million dollars in global trade, they remain essential to the semiconductor, defence and communications industries, as well as the rapidly expanding electric vehicle industry.
The United States imported more than 50 percent of its gallium and germanium from China in 2021, and analysts see the latest move by China as a blatant warning to the US and others that there could be serious consequences if China continues to be denied access to chip-making tech.
China may be the dominant producer, but there are alternatives, including Australia, Germany and the UK.
But as this restriction on exports from China drags on, there are increasing concerns in chip-manufacturing countries, who now face the very real prospect of having to realign significant supply chains and lean into the development of alternative markets for gallium and germanium, with the associated higher costs.
It’s the latest salvo in what's been dubbed “The Chip War” and check out Chris Miller’s book of the same name if you are looking for more background on how this current crisis may play out.
- Asia Media Centre
