A month after Beijing put limitations on sales overseas, citing national security concerns, China’s exports of two rare minerals critical for manufacturing semiconductors plunged to zero in August.
According to the Critical Raw Materials Alliance, China produces over 80% of the world’s gallium and roughly 60% of the world’s germanium, but according to Chinese customs data released on Wednesday, China did not export any of these elements to international markets in the previous month. July saw 5.15 metric tonnes of forged gallium exports and 8.1 metric tonnes of germanium exports.
He Yadong, a spokesperson for China’s commerce ministry, said during a news briefing on Thursday that the department had received applications from enterprises to export the two minerals, despite the lack of shipments the previous month. He merely mentioned that some applications had been granted approval.
The measures show that China is ready to respond to US export limitations on its own, despite worries about economic growth, as the tech war heats up.
China’s Economic Outlook Dim as Exports Fall Sharply
Weak domestic demand and a housing crisis have hit the world’s second-largest economy hard. Last month, exports fell by the most in more than three years, dealing a further blow to the country’s shaky economy.
Export restrictions are nicknamed a “double-edged sword” since they might hurt China’s economy and speed up supply chains elsewhere.
Even while China dominates the market for these elements, there are other suppliers and viable alternatives, according to a report by the Eurasia Group published in July.
The decline in exports is having an immediate effect on domestic economies. Gallium prices in China have dropped because of export restrictions that have led to a buildup of supplies.
According to the Shanghai Metal Market, the spot price of gallium on Thursday was 1,900 yuan ($260) per metric tonne, a decrease of over 20% from the beginning of July.
Meanwhile, supply constraints have led to a little increase in the current price of germanium, which on Thursday stood at 10,050 yuan ($1,376) per metric tonne.
Beijing prohibited the export of these two elements, used in computer chips and solar panels, in July to protect China’s “national security and interests.”
From the first of August on, exporters will need to request authorization to send them abroad.
This action has exacerbated the digital conflict between China and the US for cutting-edge chipmaking technology, utilized in smartphones, autonomous vehicles, and weaponry.
In October last year, the Biden administration announced new export rules that would prevent Chinese firms from purchasing high-end semiconductors and chip-making equipment without obtaining the necessary licenses.
But Washington’s campaign couldn’t have been a success without the help of other nations. This year, Japan and the Netherlands joined the campaign, reducing semiconductor exports to China even further.
In retaliation, Chinese authorities launched a cyber investigation into US chipmaker Micron in April, eventually barring the company from doing business with Chinese firms involved in critical infrastructure construction.
The release of Huawei’s Mate 60 Pro smartphone last month sent shockwaves through the technology industry, and now there is speculation that Washington would impose further chip limits.
A complex microprocessor constructed in contravention of US sanctions to prevent the Chinese tech giant from accessing it powers the model.
Analysts at Jefferies noted in a note published on Monday that the announcement of the Mate 60 Pro had “created political pressure” for the United States to escalate sanctions against Huawei and Semiconductor Manufacturing International Corp. (SMIC), the Chinese chipmaker suspected to have built the semiconductor.
“We expect Biden to focus on tightening the [chips] ban against China in the fourth quarter,” they continued.