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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

Technology

Technology

Beijing hits US-China tech war with chip material export limits

Flags of China and U.S. are displayed on a printed circuit board with semiconductor chips, in this i... Flags of China and U.S. are displayed on a printed circuit board with semiconductor chips, in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration/File Photo
Flags of China and U.S. are displayed on a printed circuit board with semiconductor chips, in this i... Flags of China and U.S. are displayed on a printed circuit board with semiconductor chips, in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration/File Photo

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Beijing hits US-China tech war with chip material export limits. China’s export restrictions on metals used in semiconductors, electric vehicles, and high-tech industries have escalated a trade battle with the U.S. and could disrupt global supply chains.

On Monday, China’s commerce ministry announced it would restrict exports of eight gallium and six germanium items from Aug. 1 to defend national security, a reaction to U.S. efforts to slow China’s technological progress.

One U.S. semiconductor wafer manufacturer applied for export permits to reassure investors, and a Chinese germanium producer said buyers inquired overnight as prices rose.

“China has hit the American trade restrictions where it hurts,” said Global Mining Association of China head Peter Arkell.

Jeffries analysts questioned whether U.S. Secretary of Treasury Janet Yellen’s travel to Beijing this week would be canceled due to the measure’s timing.

After restricting rare earth exports 12 years ago in a disagreement with Japan, some in the industry feared China would do so again. China is the largest producer of rare earth metals in E.V.s and military technology.

China dominates the production of minor metals like gallium and germanium, crucial to electronic products. Arkell added that replacing China in the short or medium term is a fantasy.

China makes most of gallium and germanium. According to customs data, Japan, Germany, and the Netherlands were China’s top gallium imports in 2022, Caixin reported. It indicated Japan, France, Germany, and the U.S. were major germanium importers.

Export permits, disruption worries

On Monday, AXT Inc. (AXTI.O), a U.S. semiconductor wafer maker with production facilities in China, said its Chinese subsidiary Tongmei would apply for permission to export gallium and germanium substrate products from China.

“We are actively pursuing the necessary permits and working to minimize any potential disruption to our customers,” stated AXT CEO Morris Young.

A Chinese germanium producer manager said his company had received multiple inquiries from European, Japanese, and U.S. purchasers looking to stockpile supply before the export curbs take effect. Buyers expected export permissions to take two months.

“Offer prices in the domestic and export markets have increased to 10,000 yuan ($1,380) and over $1,500 per kg, respectively,” he said.

He said the sector expected export limitations for these metals, but the timing surprised it.

“Some downstream users with long-term sales contracts are vexed about a possible jump in raw material prices, as it raises their production costs and may cause them losses,” he added, declining to be named due to sensitivity.

Taiwan and South Korea’s governments downplayed the limitations’ effects.

Taiwan Economy Minister Wang Mei-hua stated the short-term impact would be small, but they will monitor the long-term impact.

South Korea’s industry ministry stated it had enough gallium and other germanium supplies.

On Tuesday, Yunnan Lincang Xinyuan Germanium Industry Co (002428. S.Z.) increased 10% by the daily limit, and Yunnan Chihong Zinc & Germanium Co (600497. S.S.) rose 7%.

Investors gambled on more curbs, lifting Australian rare earth producer shares. Lynas Rare Earths (LYC.AX), the largest rare earth producer outside China, gained 4%.

Escalation risk

After years of restrictions, China’s limits come as Washington considers additional restrictions on high-tech microchips to China.

To prevent China’s military from using their technology, the U.S. and Netherlands are set to severely restrict chipmaking equipment supplies to China this summer.

Beijing last retaliated against U.S. chip pressure in May by banning several domestic sectors from buying Micron (MU.O) products.

China’s export limits were Jefferies analysts’ second and larger countermeasure after the Micron ban.

“The risk of a rapid escalation of U.S.-China tension is not small,” they warned.

“If this action doesn’t change the U.S.-China dynamics, more rare earth export controls should be expected.”


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