China's Metal Export Restrictions and the Criticality for US National Interests

On July 3rd, China announced its decision to impose export controls on two critical metals, gallium and germanium, starting from August 1st. These metals play a vital role in the semiconductor industry, which is crucial for strategic emerging sectors. China is not only rich in reserves of these metals but also a major global supplier. By implementing export licenses, China aims to identify the end-users and purposes of these critical metal exports to mitigate risks to national security and interests. This article will analyze the implications and risks of these restrictions on the semiconductor industry and the security of US national interests.

Gallium and germanium are both strategic critical minerals listed in China's national strategic mineral reserve. China possesses abundant reserves and dominates global production and exports of these metals. According to public data, the global total reserves of gallium are approximately 230,000 tons, with China holding the largest reserves, accounting for 80%-85% of the world's total. Gallium compounds, such as gallium nitride and gallium oxide, are essential in the development of advanced semiconductor materials used in high-frequency, high-speed, high-temperature, and radiation-resistant microelectronic devices. Gallium arsenide, a representative second-generation semiconductor material, has a significant role in the development of microelectronic devices for applications in radar systems, satellite TV broadcasting, microwave and millimeter-wave communication, wireless communication (including smartphones), and fiber optic communication. Nitride gallium, as a typical third-generation semiconductor material, is the most advanced semiconductor material globally and serves as a core material for emerging semiconductor optoelectronic industries. It has vast application prospects in areas such as fast charging for smartphones, 5G communication, power supplies, new energy vehicles, LED lighting, and radar systems.

Regarding germanium, it is also considered a crucial strategic resource and finds applications in various high-tech fields such as infrared optics, fiber optics, solar cells, catalysis, and pharmaceuticals. According to data from the US Geological Survey, the world's proven reserves of germanium are only 8,600 metric tons, primarily concentrated in the United States, China, and Russia. China accounts for approximately 41% of global germanium reserves, making it the second-largest holder after the United States. China's germanium production mainly comes from brown coal mines, allowing it to rank among the top producers globally and supply approximately 68.5% of the world's germanium over the past decade.

The control over critical mineral resources has become a new battlefield in the complex geopolitical environment of major powers. Western developed countries, including the United States and European nations, have been formulating strategies and refining their catalogs of strategic mineral resources to safeguard their strategic security in cutting-edge high-tech fields. The competition between China, the US, and Europe for critical mineral resources directly impacts industrial development and great power competition. China's export controls require exporters to provide information about end-users and purposes, and the authorities have the power to deny exports if they pose a threat to national security and interests. These measures aim to safeguard China's security and interests while emphasizing its ability to influence global semiconductor supply chains.

China's decision to impose restrictions on semiconductor materials comes at a critical juncture, just before the visit of US Treasury Secretary Yellen, highlighting the ongoing tensions between the two nations. By targeting semiconductor materials, China signals that the issue of semiconductor technology control remains unresolved and suggests that confrontations between the two sides may intensify. It is highly likely that Secretary Yellen's visit will yield limited results, similar to previous visits by Secretary of State Blinken and Secretary of Commerce Raimondo. These visits primarily focus on rebuilding formal ties rather than achieving substantial outcomes.

China's decision to impose restrictions on semiconductor materials serves as a significant propaganda tool both domestically and internationally. It demonstrates that China is not entirely at the mercy of the global semiconductor industry supply chain but rather acts in the interest of safeguarding its own priorities. The initial impact of these restrictions, starting from August 1st, may primarily affect upstream players in the gallium industry. However, gallium has widespread downstream applications, including optical components, optical communication, lighting devices, 5G, and 3D sensors. The production of gallium is distributed among several countries, making it difficult to track its usage in various semiconductor products. Therefore, the effectiveness of these regulations in identifying actual users through the issuance of licenses remains uncertain.

China's export restrictions on gallium and germanium raise concerns about the implications for the global semiconductor industry and the security of US national interests. With China's dominance in reserves and production, the restrictions may disrupt supply chains and affect downstream industries. The geopolitical competition for critical mineral resources highlights the need for countries to ensure their strategic security and reduce dependency on foreign supplies. The long-term implications of these restrictions will become clearer as they come into effect, and it remains to be seen how the semiconductor industry and national security interests will be impacted in the future.