The move, taken just days before US Treasury Secretary Janet Yellen’s visit to Beijing, has prompted more companies to rethink their dependence on the world’s second-largest economy.
Concern grows over availability of gallium and germanium
Volkswagen, which relies on gallium and germanium for its automotive products, said it was “prepared to take action together with partners if necessary” but gave no further details.
Metals will play a role in future autonomous driving features, a spokesman for the German automaker has said.
Alternative sources of gallium will not be able to come online before restrictions take effect next month and existing supplies will only last a few months, experts say.
“Stocks outside of China are no more than six months at best, so things will deteriorate quite quickly,” said Alastair Neill, director of the Critical Minerals Institute.
Setting up the facilities would take a couple of years and require investment that might not pay off if China changes its stance in the meantime, he added. “The challenge is that if you go down that path and then China lifts the ban, you can be left with a white elephant,” he said.
The US Department of Defense has a strategic reserve of germanium, but currently no gallium reserves, a spokesman said Thursday. The export restrictions are likely to further strain relations between the United States and China, as the two countries compete for dominance in semiconductor and defense technologies.
Both sides are skeptical that Yellen’s four-day visit will ease the situation, with officials acknowledging that both countries have put safeguarding national security ahead of economic ties.
“If the talks go well, many restrictions could be eased, but if the talks go badly, both sides could impose more sanctions after Yellen returns home,” said Liao Chien-yu, an analyst at Capital Securities Corp.
Some industry players said the restrictions could leave China overstocked with both metals, weighing on domestic prices, even though overseas costs have risen this week.
He germanium it is used in high-speed computer chips, plastics, and military applications such as night vision devices and satellite imaging sensors. Gallium is used in radar and radio communication devices, satellites, and LEDs.
Some big chipmakers see China’s gallium export controls as more of a warning about the economic damage the country could inflict. But if prices rise as restrictions are imposed, companies would have another reason to change their supply chains.
Taiwan’s WIN Semiconductors, which uses gallium for optoelectronic devices, told Reuters it only buys a “small number” of substrates from China, with most of its supplies coming from Germany and Japan.
Fellow Taiwanese TSMC, the world’s largest contract chipmaker, said it did not expect the measures to directly affect its production. Taiwan is one of the top producers of chips for smartphones, cars and fighter planes, supplying companies like Apple and Nvidia.
Chipmaker NXP Semiconductors doesn’t see a major impact on its business. NXP makes some chips for the automotive and communications sectors using gallium or germanium.