China’s imposition of export restrictions on crucial semiconductor metals has created significant disruptions in global supply chains, raising concerns about potential chip shortages for Western manufacturers and consumers.
The metals in question, gallium and germanium, are essential components in semiconductor chips, communications infrastructure, and military equipment. In 2022, China was the leading global producer of gallium, accounting for over 98% of total production, according to Statista. For germanium, China produced approximately 60% of the world’s supply, as reported by the Critical Raw Materials Alliance.
The Chinese government announced these export restrictions in July 2023, with the measures coming into effect in August. The restrictions have led to sharp price increases for both gallium and germanium, particularly affecting Europe. Data from the Financial Times indicates that Chinese exports of germanium fell from 13,514 kg in the latter half of 2022 to 12,410 kg in the first half of 2024. Similarly, gallium exports dropped from 28,000 kg in the first half of 2023 to 16,000 kg in the second half of the same year.
China has justified these export restrictions as necessary to protect its national interests and security. However, many speculate that the move is a retaliatory measure against U.S. export controls imposed on advanced semiconductor chips and production equipment, affecting Chinese companies such as Huawei. The U.S. has implemented these controls to limit China’s access to high-tech components used in military applications and artificial intelligence.
In response, China has also restricted exports of graphite and antimony, the latter being used in armor-piercing ammunition. Gallium and germanium are critical for a range of applications including bulbs, transistors, medical devices, thermometers, infrared optical instruments, and fiber-optic cables. The restrictions are expected to lead to shortages and price hikes in these sectors.
The U.S. International Trade Commission has warned that the global supply chain for these metals will face significant adjustments due to China’s new export controls, which took effect on August 1, 2023. The U.S. remains heavily reliant on imports of these minerals, particularly from China, given its dominant position as a major supplier.
European companies currently have some stockpiles of gallium to manage short-term needs, but the long-term outlook remains uncertain. SEMI Europe, a microelectronics industry association, highlighted that scaling up domestic production in Europe would require substantial time and investment. The establishment of a robust production infrastructure for these metals in Europe could take several years, leaving the region vulnerable to ongoing supply chain disruptions.
