In a stunning turn of events, the global tech industry is facing a rare metal crisis as China’s strategic export restrictions on gallium, an essential component for chipmaking, send shockwaves through the supply chain. Over the last seventeen days, gallium prices have skyrocketed by an astonishing 50%, setting off a frantic scramble for alternative sources and technologies. This unprecedented move by China underscores the country’s substantial influence on the tech sector and leaves major players grappling with potential repercussions.
Gallium, often overlooked but indispensable, has emerged as a linchpin in chip manufacturing, particularly in its compounds gallium arsenide (GaAs) and gallium nitride (GaN). This situation is exacerbated by China’s tight grip on gallium production; the country commands an impressive 80% of the world’s output, granting it substantial leverage in global tech dynamics. As tensions between the US and China continue to simmer, this move is interpreted by many as a strategic play in the ongoing economic power struggle between the two giants.
According to recent reports from Bloomberg, the sudden surge in gallium prices has propelled the material to a 10-month high of $400 per kilogram. This unexpected spike places significant pressure on chip manufacturers and companies reliant on gallium for high-performance semiconductor designs. For context, this price point starkly contrasts with high-purity silicon metal, which fetches just $2 per kilogram, highlighting the hefty toll this price surge could take on the industry.
The epicenter of gallium refinement is predominantly confined to China and Japan, with a solitary facility attempting to hold the fort in Europe. However, the European facility’s output is a mere drop in the ocean when compared to the continent’s burgeoning demand. Consequently, non-producing nations are left with no recourse but to import gallium or processed gallium arsenide wafers, further straining global supply chains.
China’s imposition of export restrictions has compounded the situation, requiring US-based entities to navigate a complex process of registration with China’s Ministry of Commerce. While this requirement isn’t entirely uncommon, the timing is what caught many off guard. Companies could only initiate license applications starting from August 1st, the same day the export restrictions took effect. With licenses potentially taking up to 45 days to secure, the process has effectively introduced attrition into the equation. Couple this with China’s relatively short notice of the restrictions (announced in early July), and the stage was set for China’s disruptive masterstroke.
The repercussions of this maneuver are far-reaching, especially for US chipmaking capabilities. While gallium hails from China during extraction, the US’s significant lag (a five-generation gap) in cutting-edge microelectronics development diminishes the opportunities to leverage gallium’s unique properties. Meanwhile, China’s export restrictions position the nation to amass gallium reserves, primed for deployment once their chip manufacturing technology aligns.
Foto credit: Nick Fewings
