Explained: Why China Has Blocked Export Of Chip Materials Gallium, Germanium To US

In a dramatic escalation of the trade war, Beijing announced a sweeping ban last week on exports of some of rare minerals to the United States, after Washington ramped up its clampdown on the Chinese chip industry.

"In principle, exports of gallium, germanium, antimony, and other super-hard materials to the U.S. are not allowed, effective immediately" the Chinese Ministry of Commerce said in a statement on 3 December, a move it called essential to “safeguard national security and interests."

Crucial To Tech Ecosystem

Gallium and germanium are strategic elements predominantly used in electronics. Both are byproducts from processing other commodities such as coal and bauxite, the base for aluminium production.

Gallium-based compounds, such as, Gallium arsenide (GaAs) and Gallium nitride (GaN) are used in the production of semiconductors, light-emitting diodes (LEDs) and solar panels.

The largest use of germanium is in the semiconductor industry. When doped with small amounts of arsenic, gallium, indium, antimony or phosphorus, germanium is used to make transistors for use in electronic devices.

China is the world’s largest producer of the two elements, with more than 95 per cent of the global gallium output and 67 per cent of germanium production, according to the UK Critical Minerals Intelligence Centre.

Other countries that produce gallium include Japan, South Korea, Russia and Ukraine, according to the CRU Group, a metals industry intelligence provider. Germanium is also produced in Canada, Belgium, the US and Russia.

China also holds an almost 50 per cent share in global antimony production, which is used as a flame retardant for automobiles and electronics.

In June 2023, China made a bold move, signalling plans to limit exports of crucial chipmaking materials like gallium and germanium, though it didn’t specify which countries would face these restrictions.

These materials, including antimony, superhard materials, and graphite, are classified as "dual-use," meaning they have both civilian and military applications.

Last month, China's Commerce Ministry had unveiled a detailed list of other dual-use materials, metals, and products, imposing strict export controls on key resources like tungsten, magnesium, and titanium.

The Trigger

This sweeping export ban is latest in China's tit-for-tat trade war on technology with the US and Europe, with Washington being “the main target”.

The decision came within 24 hours of the Biden administration expanding its export controls and adding 140 Chinese entities to a trade blacklist. Many of these entities are key players in China’s chip production ecosystem.

A Chinese Commerce Department spokesperson said the latest move was driven by the U.S. "weaponizing" its own export controls and blacklisting many Chinese companies. This has violated international orders, hurt business interests and seriously disrupted global supply chain stability, the spokesperson said.

"Any organization or individual, regardless of nationality or location, that violates these regulations will be subject to legal consequences," the spokesperson added.

What Next

Beijing almost certainly sees these controls as a potential bargaining chip with President-elect Donald Trump, who will take office on 20 January next year. On November 25, he threatened to impose an “additional” 10 per cent tariff on the imports of Chinese goods in the US.

China’s move showcases a shift in tactics, highlighted in state-owned media, with one such publication describing Beijing’s move as “just and righteous”.

“Those doubting China’s decision could ask the US government why it holds the world’s largest germanium mines but seldom exploits them,” it said.

Experts believe China’s export ban is a counterstrike, aimed not only at the Biden administration's sanctions but also as a preemptive move against Trump’s tough trade policies.

But Beijing is playing a risky game. History serves as a warning: in 2010, China’s rare earth export ban to Japan backfired, as Japan quickly turned to alternative suppliers like Australia’s Lynas, weakening China’s leverage.

With industry insiders bracing for even harsher U.S. policies under President-elect Trump, the big question is: how far will China push its weaponised export controls? The stakes couldn’t be higher.