What China’s new move in microchip war means for world
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August 3, 2023What China’s new move in microchip war means for world
What China’s new move in microchip war means for world
What China’s new move in microchip war means for world
In a significant development that further intensifies the ongoing chip war between China and the US, China has initiated restrictions on the export of critical materials essential to the semiconductor sector.
Under these newly imposed controls, special licenses are now mandatory for exporting gallium and germanium from the world’s second-largest economy. These materials play a pivotal role in chip production and possess crucial military applications.
China’s dominance in the global supply chain of gallium and germanium is undeniable. An astonishing 80% of the world’s gallium and 60% of germanium are produced by China, according to the Critical Raw Materials Alliance (CRMA), an industry body.
Termed as “minor metals,” these materials are not commonly found in nature as standalone elements but are often by-products of various processes.
As tensions simmer between the two economic giants, China’s strategic move comes in response to efforts by the US to restrict Beijing’s access to advanced microprocessor technology. This tit-for-tat approach has given rise to concerns about the emergence of “resource nationalism,” wherein governments withhold critical materials to wield influence over other nations.
China’s Export Controls and Global Implications
The announcement of China’s export restrictions has been a well-calculated move, seemingly timed in response to similar restrictions by the Netherlands and other nations. Colin Hamilton, a prominent voice from the investment firm BMO Capital Markets, explained the situation succinctly: “If you won’t give us chips, we won’t give you the materials to make those chips.”
This escalating exchange of actions between the world’s top economies signifies a departure from the narrative of globalization. Dr. Gavin Harper, a critical materials research fellow at the University of Birmingham, remarked, “The idea that international markets will simply deliver materials is gone.”
Gallium and Germanium: Powerhouses of Technological Advancement
Gallium and germanium, while often overshadowed by their more prominent counterparts, are integral components of high-frequency computer chips, LEDs, solar panels, and even military vision goggles. Their scarcity and the intricate processes required for their use render them indispensable in cutting-edge technology.
While concerns about supply disruptions arise, experts believe alternatives and recycling efforts could mitigate potential challenges. Nevertheless, China’s dominance in producing top-quality semiconductors remains a formidable challenge to address.
Charting a New Course: The Future of Semiconductor Materials
Despite China’s formidable grip on gallium and germanium exports, the global semiconductor industry is poised to adapt. Comparable to China’s restrictions on rare earth minerals a decade ago, these actions are likely to stimulate the emergence of alternative sources and more sustainable practices.
Anna Ashton, Director for China Corporate Affairs and US-China at Eurasia, emphasizes that these developments aren’t solely a reaction to China’s export constraints. They stem from evolving expectations of heightened demand, geopolitical rivalries, and a broader shift away from unrestricted international trade.
Towards a Balanced Future: Balancing Global Resource Dependencies
The trade restrictions echo broader sentiments of “de-risking” from China, aiming to lessen reliance on the nation for both raw materials and finished goods. Diversification of supply chains and the cultivation of local processing capabilities are crucial steps, albeit ones that will require considerable time and investment.
Australia and Canada, endowed with mineral wealth, are among those eyeing the materials crisis as a gateway to opportunity. However, as the US and China demonstrate, weaponizing resources and technology has far-reaching environmental consequences, impacting critical green technologies.
Dr. Harper aptly captures the universal dimension of this challenge: “This isn’t a national problem. This is a problem that we face as a human race.” As the world transitions towards sustainable practices, policy makers must seize the moment to secure access to these vital materials.
In the grand tapestry of international trade, it’s vital to recognize that seemingly abstract policies hold the potential to shape the lives of individuals. The ongoing chip war may revolve around elements like gallium and germanium, but its ripple effects touch the cost of vehicles, the affordability of green technology, and ultimately, the course of our shared future.
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