China’s Export Curb on Chip-Making Metals Prompts Countries to Explore Supply-Chain Diversification
By Wall St. Journal, July 5, 2023

China could leverage its restrictions in discussions with Yellen, according to analysts at Eurasia Group, a risk consulting firm. Beijing’s move also serves as a warning shot “to remind countries including the United States, Japan, and the
Netherlands that China has retaliatory options and to thereby deter them from imposing further restrictions on Chinese access to high-end chips and tools,” Eurasia’s analysts told clients in a note Tuesday.

Overall, the impact of China’s export restrictions on gallium and germanium is likely to be limited in the short term.

In South Korea’s semiconductor sector, gallium is used mainly for research and development of next-generation products, the country’s Trade Ministry said. Germanium goes into some gases used in semiconductor production, but it can be replaced with
other materials and alternative import routes are available, the ministry said.

The compound gallium nitride, meanwhile, is used to make semiconductors that deal with high-voltage electrical flows, such as power-management chips widely used in cars and certain radio-frequency chips for telecommunication devices.

U.S. and European firms specializing in those types of chips could see a bigger impact down the road, while memory chip-driven South Korea is relatively shielded, said Ahn Jin-ho of Hanyang University who is a vice chairman of the Korean Institute of
Metals and Materials.

Companies that produce power-management chips and automotive chips using semiconducting materials such as gallium nitride include U.S.-based chip makers Wolfspeed and NXP Semiconductors, as well as Germany’s Infineon Technologies. Wolfspeed and NXP
couldn’t be reached for comment. Infineon said that while it can’t comment on specific materials, it currently doesn’t see a major impact that could disrupt its manufacturing capabilities.

Radio-frequency semiconductors, used in telecommunication devices, are dominated by U.S. and Japanese firms including Broadcom, Qualcomm, Qorvo and Murata Manufacturing. These companies didn’t immediately respond to requests for comment. In addition to
telecommunication base stations, radio-frequency semiconductors are also used in defense- and satellite-related applications.

Even should disruptions occur, the metals and mining industry has longer-run options to help plug shortfalls in places such as the U.S. and Australia. Germanium and gallium are typically recovered as byproducts from zinc and alumina refineries.

These types of niche critical minerals, which can be costly to process, have long been overlooked by global miners in favor of industrial commodities that can be produced at scale. China has meantime exported them relatively cheaply, allowing the country
to become the dominant supplier.

Nyrstar, which is owned by trading giant Trafigura Group and is the world’s No. two zinc producer, is considering building a $150 million facility to recover and process germanium and gallium at its zinc smelter in Clarksville, Tenn. The facility could
produce enough of the metals to meet as much as 80% of annual U.S. demand, the Netherlands-based company said in emailed remarks on Tuesday.

“We are currently discussing the potential development with relevant government entities in order to finalize the business case and move forward with this investment as soon as practically possible,” the company said.

Nyrstar last month said it could also consider extracting germanium it has previously ignored at its Australian operations. Doing so would be of benefit to countries including the U.S., it said. The company’s estimates suggest it could account for
roughly 5% of world production there if it did so.

There are substantial U.S. reserves of germanium in Alaska, Tennessee and Washington, and the U.S. is able to recycle new and old scrap, according to the U.S. Geological Survey. Some domestic zinc deposits could also hold a significant amount of gallium,
the agency said in a report this year.

https://www.wsj.com/articles/chinas-latest-export-controls-prompt-countries-to-explore-supply-chain-diversification-318e74d1

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