China restrictions on gallium and germanium ‘harmful’ to US chipmakers
China’s impending export ban on gallium and germanium will be detrimental to the cost-effective manufacturing of advanced semiconductor chips in the United States in the near term
Negotiations between the two nations are likely to take place in the next few months, according to the top executive at Defense Metals Corp.
Chipmakers in the US still have a little bit of time to import gallium and germanium from China before the restrictions take effect, Luisa Moreno, president and director at Defense Metals and strategic minerals specialist, told Fastmarkets in an interview on Wednesday July 12.
According to Moreno, chipmakers – which typically stockpile around three to six months’ worth of strategic materials – could potentially build up to nine months’ worth of inventory. After that, however, they will have to find new ways of obtaining gallium and germanium, she said.
Starting August 1, Chinese exporters of those materials will need to apply for licenses and disclose more information about customers.
According to Moreno, gallium is the more critical mineral to stockpile because China currently produces more than 90% of global supply, while substantial primary supply of germanium is available outside of China from Canadian zinc producer Teck Resources.
Notably, gallium prices have already increased significantly by about 30% since the new controls were announced on July 3, and they will continue to move up, Moreno said.
Fastmarkets assessed the price for gallium 99.99% Ga min, in-whs Rotterdam at $302-360 per kg on July 12, up by 28.54% from $250-265 per kg on June 30.
Gallium could be substituted with silicon, but the issue is performance, Moreno said. In low-end chip applications – in cars, for example – silicon is an acceptable substitute; for chips used in military applications and satellites, however, it is not.
Sourcing could be a challenge
Gallium is obtained mainly from the mining and mineral processing of bauxite ore for aluminium, according to a report by the US Geological Survey (USGS). It also can be obtained by processing sphalerite ore for zinc and recycled from scrap, the report said.
While domestic aluminium processors could potentially produce gallium by extracting it from bauxite residue or “red mud,” they would have to reconfigure their supply chains to do so, and this would not likely be cost-effective given the value of the material, according to Moreno.
“There’s nothing the US can do immediately,” she said. “We have to look at increasing production… That will take five years, perhaps. It’s not going to happen overnight, but an economic process has to be developed.”
Negotiations between the US and China are likely to occur within the next couple of months, however, and that could affect the outlook for importers, she said.
The other two superpowers of chipmaking are the Netherlands and Japan, Moreno said. After the US restricted exports of advanced chips to China last October, both agreed in January to follow suit, she said. Last month, the Netherlands executed this strategy by restricting the sales of Dutch manufacturer ASML’s machinery to China.
“Japan is probably next, and South Korea, perhaps,” she said.
Now China is worried that they won’t have advanced chips made of gallium. So what did they do? They restricted exports of gallium… There will be a give and take, trading equipment for gallium
The US deal with Japan and the Netherlands included assurances that Japan and the Netherlands will not allow their semiconductor manufacturing equipment companies to sell to China the categories of equipment that the US is now prohibiting, and that the Dutch and Japanese governments would prohibit the sale of lithography equipment, according to a March report by the Center for Strategic & International Studies. The arrangement advances the formation of a new “plurilateral export controls regime on semiconductors,” it said.
Still, both South Korea and Germany – and ideally the entire European Union – need to join the agreement to prevent the fracturing of the value chain, according to the report.
A separate report released this week by the International Energy Agency highlighted gallium and germanium in particular as examples of niche, critical minerals that may disrupt supply chains “due to a higher reliance on a small group of suppliers.” The report also listed magnesium, high-purity manganese, high-purity phosphorus and silicon in this category.
Gallium and gallium products are important to the aerospace and telecommunications industries; they are used in the production of highly specialized integrated circuits, semiconductors and transistors necessary for high-performance computers and smartphones, according to the USGS report.
Defense Metals Corp owns the Wicheeda Project in British Columbia, which has an indicated mineral resource of 5 million tonnes averaging 2.95% total rare-earth oxide, and an inferred mineral resource of 29.5 million tonnes average 1.83% total rare-earth oxide, according to its website.
Moreno is a physics engineer with a PhD in materials science and mechanics; she serves as the chief executive officer of Graphano Energy Ltd, founder and managing editor of Tahuiti Global Inc, and as a consultant on mineral assets and technologies for companies and government institutions.