In a move with widespread ramifications for the global semiconductor industry, China's recent imposition of export controls on gallium has sent prices soaring, reflecting the country's pivotal role as a dominant supplier of this critical material. Starting August 1, 2023, items related to gallium and germanium, crucial components in advanced technology, cannot be exported from China without proper authorization. This decision, aimed at safeguarding national security and interests, has led to a significant market reaction with gallium prices rocketing over 50% since the announcement.
China, which harbors approximately 68% of the world's gallium reserves, has long been the largest producer of this 'new grain of the semiconductor industry.' The metal, essential for various high-tech applications, from optoelectronics to microwave communication, accounts for about 80% of total consumption in the semiconductor sector. As per the U.S. Geological Survey (USGS), China's vast reserves and over 90% contribution to global production underscore its influence over the gallium market.
The impact of China's new policy was immediate and significant. Trading prices for gallium, as reported by Fastmarkets, reached $400 per kilogram on August 9, marking a peak not witnessed since the previous year. This price surge reflects the apprehension and rush among international companies and clients to secure supplies before the full effects of the export controls are felt. Many Chinese producers are awaiting export approvals, a process anticipated to span several weeks, further constraining the global supply chain.
This strategic maneuver by China is seen by some as a countermeasure to the U.S.'s restrictions on high-tech exports to China. The export controls allow China to monitor the end-users and purposes of these critical metal exports, reducing potential risks to its national security and interests. As the world's tech giants scramble to reassess their supply chains, the repercussions extend beyond mere pricing fluctuations. Industry analysts predict a possible restructuring of the global gallium trade, with reduced export quotas from China likely leading to increased costs and technological hurdles for nations reliant on these imports.
As countries like the European Union, the United States, and Japan recognize gallium's strategic importance, the search for alternative sources may prove not only costlier but also less effective. The restrictions could lead to a decrease in prices for domestic GaAs substrates and raw materials in China, while foreign manufacturers might face increased prices, supply shortages, and heightened pressure.
In conclusion, China's latest policy on gallium exports exemplifies the intricate interplay between national security concerns and global supply chains. As the semiconductor industry braces for the impact, the world watches closely how this strategic move will reshape the market dynamics and technological advancements in the years to come.
