China Limits Exports of Semiconductor-Making Metals Transcript

These are very niche ingredients, but highly significant.

Yeah. Yeah, absolutely. And part of the supply chain and the difficulties of securing and making the supply chains more resilient for those Western chipmakers. Obviously, this is a complication. Now, I’m not necessarily saying outright that this is a retaliation. I’ll give you the facts and you decide yourself whether you think this is tit-for-tat. Because if the US and some European partners are going to be restricting advanced semiconductors and the chipmaking equipment to China, and China has the raw materials that are critical to the chipmaking, well China is going to restrict that. And the two particular metals we’re talking about are gallium and germanium, which by the way, China kind of dominates production. Not necessarily because they are rare earths, but because they’ve been able to keep the cost and the prices fairly low. I mean, it’s not rare as I said, but it can be difficult to extract. These are byproducts of other processes in processing coal and bauxite and the like, and China has plentiful supplies of that.

(01:06)
So again, these go into, these are critical components, critical metals, that go into compound semiconductors. Compound semiconductors are different from silicon. Silicon comes from a single element, whereas compound semiconductors are made from at least two metals or two elements. So compound semiconductors as well as electric vehicles and telecommunications equipment and display.

(01:29)
So you can see, while we don’t talk about gallium in germanium much, it’s key and we’ll have to see where we go from here. Whether these export controls that China has announced, the commerce ministry has announced, will start being put into place from August 1st. So anybody in China who’s selling it abroad will have to apply for an export license. Good luck there. Because again, this looks like it’s a political retaliation. Looks like.

Stephen, but you said it, right? We really don’t talk about these metals, gallium and germanium. Tell us a little bit about who else produces these metals. What then happens to surprises if you don’t have the supplies coming from China, and what happens to the products that they go into?

Yeah. Well, prices go up, I would imagine. It’ll depend, in the short term obviously, what kind of stockpiles those buyers would have in the West. But you mentioned as well those other suppliers and that will be key as well. Where will the market be able to get other supplies if the prices of China-originated germanium and gallium start going up as one would expect it to do? But again, the timeframe is key.

(02:43)
Let’s bring up gallium, at least we have the spot prices here. I believe these are quoted from the Shanghai Metals Exchange. It did go up overnight about 5% and the last time I checked. But as you can see, prices have been a little bit depressed. Again, China has kept the prices of these key components low because they want to continue to dominate this market. So again, as we shift to other suppliers, and the other suppliers of gallium include Japan and South Korea, allies, of course, of the United States in the supply chain, but also Russia and Ukraine.

(03:17)
Now switch the page. We can look at germanium. There it is. The other suppliers are the US and Canada, which helps the US, obviously, but also Belgium. And then there’s Russia again. So don’t expect too much germanium and gallium coming out of Russia for the global supply chain. But again, there are some alternatives. It’s just a matter of how much time it will take to get those supplies from other sources.