Tech war: China’s move to impose controls on gallium and germanium is a mixed blessing for country’s exporters

China’s decision to impose export controls from next month on gallium and germanium, important materials used in semiconductor manufacturing, is a targeted measure aimed at improving national security but it may also bring about industry disruption, Chinese experts say.

In a move widely seen as Beijing’s retaliation against the US and its allies for imposing chip restrictions on China, the country’s commerce ministry and customs administration announced that exports of the critical metals and related products will be subject to government approval from August 1.

In taking the step Beijing is leveraging its quasi-monopoly position in low-quality gallium. China is responsible for over 90 per cent of the world’s output of the rare metal.

Chen Feng, deputy general manager at Beijing Jiya Semiconductor Material, which produces 60 tons of gallium annually, said Beijing has made the “right move” given the metal’s strategic importance for national security. At the same time, Chen said the new export regime may affect the business of Chinese gallium extractors and exporters.

While China has a quasi-monopoly over the extraction of raw gallium, Chinese companies are at a disadvantage when it comes to processing the rare metal into middle or end products, Chen added.

“Gallium materials need to be purified and componded into semi-insulated material, but there is still a considerable gap between China and the world’s leading companies in terms of producing the high purity materials and stability of composition,” said Chen.