China’s New Restrictions on Raw Materials: Gallium and Germanium

On July 3rd, China took action in the semiconductor exports war by imposing restrictions on two raw materials used in the manufacturing of a wide variety of technical applications, including semiconductors and other advanced technologies: gallium and germanium. As a result, the global supply chain is already starting to feel the impacts of this geopolitical decision.

Understanding Gallium and Germanium 

Gallium (Ga) and germanium (Ge) are essential chemical elements used in the production of semiconductors. Gallium, particularly gallium arsenide (GaAs) and gallium nitride (GaN) compounds, is primarily used in optoelectronics, such as light-emitting diodes (LEDs), laser diodes, solar cells, and high-frequency transistors.  

Germanium was one of the earliest materials used in the production of semiconductors before the widespread use of silicon. It exhibits similar properties to silicon and is used in the production of transistors, diodes, and other electronic components. Both elements possess unique properties that make them invaluable in the creation of high-performance semiconductors. 

China’s Restrictions and Rationale 

China, being a major player in the global semiconductor market, has recently implemented restrictions on the export of gallium and germanium. The Chinese Ministry of Commerce stated these materials would be subject to a licensing system for national security reasons, meaning the government will now control the export of these materials placing a hardship on Western companies to receive a consistent supply. The rationale behind China’s decision lies in reducing its dependence on foreign suppliers, particularly amid geopolitical tensions and the growing importance of semiconductors in critical technologies. 

This new policy brings its own set of challenges to the semiconductor supply chain. It comes in response to policies imposed by Western Nations, including the US & the Netherlands, which have created substantial obstacles to growth of China’s manufacturing and production industries.

Impact on the Semiconductor Supply Chain 

SiliconExpert’s Supply Chain Risk Management (SCRM)  tool, as early as July 6th, alerted us of a 27% price increase on gallium as buyers lock in supply.