On Tuesday, companies scrambled to secure supply as some industry suppliers worried that limitations on rare earth shipments would follow China's decision to restrict exports of key metals widely used in electronics and electric vehicles.
The sudden announcement on Monday that export restrictions on select gallium and germanium goods will take effect on August 1 has escalated the trade conflict with the United States and may result in more disruptions to international supply chains.
Analysts interpreted the action, which the Chinese commerce ministry claimed was necessary to safeguard national security, as a retaliation to growing US efforts to limit China's technology advancements.
It arrived shortly before American Independence Day and before Janet Yellen, the secretary of the US Treasury, was scheduled to travel to Beijing.
"China has hit the American trade restrictions where it hurts," said Peter Arkell, chairman of the Global Mining Association of China.
Concern at the action was expressed by the European Commission.
To reassure investors, one American maker of semiconductor wafers said on Tuesday that it was requesting export licences, and a Chinese producer of germanium stated that inquiries from potential customers had poured in as prices soared overnight.
The sixteen germanium goods and the eight gallium products mentioned are also utilised in other high-tech sectors.
Some in the metals sector expressed concern that China, which cut rare earth exports 12 years ago due to a dispute with Japan, may now impose new limitations on rare earth exports. The world's largest producer of rare earths, a group of metals used in EVs and military hardware, is China.
"Gallium and germanium are just a couple of the minor metals that are so important for the range of tech products and China is the dominant producer of most of these metals. It is a fantasy to suggest that another country can replace China in the short or even medium term," Arkell said.
The majority of the world's gallium and germanium is made in China.
According to customs data cited by the news website Caixin, the Netherlands, Germany, and Japan were China's top importers of gallium items in 2022. According to the report, Japan, France, Germany, and the United States were the top importers of germanium products.
According to four people with knowledge of the situation who spoke to Reuters, the trade ministry will discuss the export restrictions with key producers of the metals on Thursday.
AXT Inc., a manufacturer of semiconductor wafers in the United States with factories in China, announced on Monday that its Chinese subsidiary Tongmei would submit an application for licences to continue exporting substrate products made of gallium and germanium.
"We are actively pursuing the necessary permits and are working to minimize any potential disruption to our customers," said AXT CEO Morris Young.
An Intel spokesman stated that the business was still reviewing the statement from the ministry.
"Our strategy of having a diverse, global supply chain minimizes our risk to local changes and interruptions," he said.
Most supplies, according to a source at the German chipmaker Infineon, originate from countries other than China. The business now manufactures gallium nitride semiconductors in Villach, Austria, and will start doing so in Kulim, Malaysia, in the near future.
China's action, according to Germany's BDI industrial association, increases the need for greater raw material independence. Although the new regulations do not specifically target any nations, they do make export more challenging and China may refuse licences to particular areas, according to Bernstein analysts.
They noted that if the cost of materials based on gallium and germanium rose due to a shortage of supply, semiconductor manufacturers might start looking at substitute materials.
A manager at a germanium manufacturer in China reported that his company had gotten inquiries from clients in Europe, Japan, and the US looking to stockpile product before the export bans go into force. The buyers thought it may take up to two months to get export licences.
According to him, domestic bids increased 2% on Tuesday to 10,000 yuan ($1,380) per kilogramme, while export rates increased 7% to $1,500 per kg.
The manager, who declined to be identified due to the sensitivity of the issue, stated that while the industry had anticipated certain export limitations on these metals, the timing had shocked them.
Some downstream customers who have long-term sales agreements are "angry about a potential increase in raw material prices, as it raises their production costs and may result in them losing money," he said.
Any inconvenience caused by the limits was downplayed by Taiwan and South Korea.
On Tuesday, shares of some metal producers increased. By the daily upper limit, Yunnan Lincang Xinyuan Germanium Industry Co. increased by 10%, while Yunnan Chihong Zinc & Germanium Co. increased by 7%.
As investors staked wagers that additional restraints may be implemented, shares of Australian producers of rare earths also increased. The largest producer of rare earths outside of China, Lynas Rare Earths, had a 4% increase in share price.
Washington is considering further limits on the export of high-tech microchips to China, following a number of bans in recent years, as China implements its controls.
In an effort to stop their technology from being exploited by China's military, the US and the Netherlands are also anticipated to further restrict supplies of chipmaking equipment to China this summer.
Beijing recently took action in retaliation for American pressure on semiconductors in May when it forbade several Chinese industries from buying goods from American memory chipmaker Micron.
The export restrictions, after the Micron ban, are China's second and more significant response, according to Jefferies analysts.
"The risk of a rapid escalation of U.S.-China tension is not small," they said.
"If this action doesn't change the U.S.-China dynamics, more rare earth export controls should be expected."
(Source:www.theprint.in)
The sudden announcement on Monday that export restrictions on select gallium and germanium goods will take effect on August 1 has escalated the trade conflict with the United States and may result in more disruptions to international supply chains.
Analysts interpreted the action, which the Chinese commerce ministry claimed was necessary to safeguard national security, as a retaliation to growing US efforts to limit China's technology advancements.
It arrived shortly before American Independence Day and before Janet Yellen, the secretary of the US Treasury, was scheduled to travel to Beijing.
"China has hit the American trade restrictions where it hurts," said Peter Arkell, chairman of the Global Mining Association of China.
Concern at the action was expressed by the European Commission.
To reassure investors, one American maker of semiconductor wafers said on Tuesday that it was requesting export licences, and a Chinese producer of germanium stated that inquiries from potential customers had poured in as prices soared overnight.
The sixteen germanium goods and the eight gallium products mentioned are also utilised in other high-tech sectors.
Some in the metals sector expressed concern that China, which cut rare earth exports 12 years ago due to a dispute with Japan, may now impose new limitations on rare earth exports. The world's largest producer of rare earths, a group of metals used in EVs and military hardware, is China.
"Gallium and germanium are just a couple of the minor metals that are so important for the range of tech products and China is the dominant producer of most of these metals. It is a fantasy to suggest that another country can replace China in the short or even medium term," Arkell said.
The majority of the world's gallium and germanium is made in China.
According to customs data cited by the news website Caixin, the Netherlands, Germany, and Japan were China's top importers of gallium items in 2022. According to the report, Japan, France, Germany, and the United States were the top importers of germanium products.
According to four people with knowledge of the situation who spoke to Reuters, the trade ministry will discuss the export restrictions with key producers of the metals on Thursday.
AXT Inc., a manufacturer of semiconductor wafers in the United States with factories in China, announced on Monday that its Chinese subsidiary Tongmei would submit an application for licences to continue exporting substrate products made of gallium and germanium.
"We are actively pursuing the necessary permits and are working to minimize any potential disruption to our customers," said AXT CEO Morris Young.
An Intel spokesman stated that the business was still reviewing the statement from the ministry.
"Our strategy of having a diverse, global supply chain minimizes our risk to local changes and interruptions," he said.
Most supplies, according to a source at the German chipmaker Infineon, originate from countries other than China. The business now manufactures gallium nitride semiconductors in Villach, Austria, and will start doing so in Kulim, Malaysia, in the near future.
China's action, according to Germany's BDI industrial association, increases the need for greater raw material independence. Although the new regulations do not specifically target any nations, they do make export more challenging and China may refuse licences to particular areas, according to Bernstein analysts.
They noted that if the cost of materials based on gallium and germanium rose due to a shortage of supply, semiconductor manufacturers might start looking at substitute materials.
A manager at a germanium manufacturer in China reported that his company had gotten inquiries from clients in Europe, Japan, and the US looking to stockpile product before the export bans go into force. The buyers thought it may take up to two months to get export licences.
According to him, domestic bids increased 2% on Tuesday to 10,000 yuan ($1,380) per kilogramme, while export rates increased 7% to $1,500 per kg.
The manager, who declined to be identified due to the sensitivity of the issue, stated that while the industry had anticipated certain export limitations on these metals, the timing had shocked them.
Some downstream customers who have long-term sales agreements are "angry about a potential increase in raw material prices, as it raises their production costs and may result in them losing money," he said.
Any inconvenience caused by the limits was downplayed by Taiwan and South Korea.
On Tuesday, shares of some metal producers increased. By the daily upper limit, Yunnan Lincang Xinyuan Germanium Industry Co. increased by 10%, while Yunnan Chihong Zinc & Germanium Co. increased by 7%.
As investors staked wagers that additional restraints may be implemented, shares of Australian producers of rare earths also increased. The largest producer of rare earths outside of China, Lynas Rare Earths, had a 4% increase in share price.
Washington is considering further limits on the export of high-tech microchips to China, following a number of bans in recent years, as China implements its controls.
In an effort to stop their technology from being exploited by China's military, the US and the Netherlands are also anticipated to further restrict supplies of chipmaking equipment to China this summer.
Beijing recently took action in retaliation for American pressure on semiconductors in May when it forbade several Chinese industries from buying goods from American memory chipmaker Micron.
The export restrictions, after the Micron ban, are China's second and more significant response, according to Jefferies analysts.
"The risk of a rapid escalation of U.S.-China tension is not small," they said.
"If this action doesn't change the U.S.-China dynamics, more rare earth export controls should be expected."
(Source:www.theprint.in)