China to Restrict Exports of Key Chip Metals

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Facts

  • China will introduce restrictions on exports of two rare metals vital for the production of semiconductors and other electronic components on Aug. 1, the Chinese Ministry of Commerce announced on Monday. This comes amid an escalating China-US technology trade dispute.1
  • Citing national security reasons, the ministry said that starting next month, exporters will have to apply for a license to ship the two metals — gallium and germanium — their chemical compounds, and provide detailed information on overseas buyers and intended usage.2
  • China produces about 60% of the world's germanium, used primarily in optical fibers, plastics, and infrared radiation as well as military applications, and about 80% of the world's gallium, used in radar and radio communications devices, satellites, and LEDs [light-emitting diodes].3
  • Beijing's step to limit shipments of critical raw materials the EU considers "crucial to Europe's economy" follows the Netherlands' move to issue new export restrictions on certain semiconductor equipment, also affecting exports from major European [Dutch multinational] technology company, ASML.4
  • Earlier, the Netherlands and Japan agreed with the US to impose tighter export curbs on chip making equipment after Washington imposed barriers on exports of chip gear made by US companies to China in October per national security protocols.5
  • Meanwhile, Washington is reportedly considering new curbs beyond those announced in October — including on the export of certain artificial intelligence (AI) chips to China, after the PRC imposed an import ban on products from US chipmaker Micron.6

Sources: 1Al Jazeera, 2Bloomberg, 3Reuters, 4CNN, 5Asia Financial, and 6Tech Wire Asia.

Narratives

  • Pro-China narrative, as provided by Global Times. Beijing's decision is just the latest chapter in the US-instigated chip war that violates the basic principles of the alleged "free market economy" that the collective West likes to promote when it serves their interests. Fearing to lose its technological supremacy and in an effort to prevent China's technological rise, the US doesn't hesitate to pressure its allies and disrupt global supply chains. It is only natural that the PRC, in order to protect its national security interests, takes proactive measures to respond to Washington's tactics of economic coercion.
  • Anti-China narrative, as provided by Bloomberg. While Beijing's move underscores China's dominance in critical minerals, it also highlights its vulnerabilities. The decision may backfire, as it may speed up efforts by the US and its allies to reduce their reliance on China by diversifying their supply chains. Implementing export curbs also threatens China's market dominance by increasing the West's efforts to tap other supply sources. That said, and given China's mounting economic woes and the potentially negative national security implications, Beijing has more to lose from an escalating chip war than the US.

Predictions