China Imposes Tighter Controls Over Chip Manufacturing Materials

In a significant development that is set to escalate global semiconductor tensions, China has announced tighter controls over the export of two critical materials used in the production of computer chips – gallium and germanium.

Tightening Export Controls

Starting next month, Chinese exporters of gallium and germanium, both integral to chip manufacturing, will require special licences. These silvery metals are not just used in the semiconductor industry but also play a pivotal role in the manufacturing of communication and military equipment, as well as solar panels.

In a statement, China’s Ministry of Commerce said these restrictions are a necessary step to “safeguard national security and interests”. However, the Ministry did not delve into further detail about the reasoning behind this decision.

A Retaliatory Measure?

China’s move appears to be a counterblow to the steps taken by Western nations to limit its access to advanced microprocessors. Over the past few years, the US and Europe have been implementing a series of measures to restrict Chinese access to semiconductor technology, citing potential military applications as the chief concern.

These measures include a policy announced by Washington last October, which requires licences for companies exporting chips to China, regardless of their origin. Japan and the Netherlands have also jumped on the bandwagon by implementing similar restrictions on the export of certain semiconductor manufacturing equipment.

Global Implications

As the world’s most prolific producer of gallium and germanium, accounting for 80% and 60% of the global supply respectively, China’s decision has the potential to significantly disrupt the global chip manufacturing and supply chain. This move may even act as a catalyst to intensify the already strained relationships between China and the Western world, which is being termed as the “chip war”.

In this tug-of-war for technological supremacy, other countries are not left unaffected. South Korea, for instance, expects a “limited impact” in the short term due to China’s latest move, according to an official from the country’s industry ministry.

A Blow to Globalisation?

Morris Chang, the retired founder of Taiwanese chipmaker Taiwan Semiconductor Manufacturing Company, offered an intriguing perspective on these developments. According to Chang, the globalised world we have known is changing. National security, technological supremacy, and economic leadership are now being prioritised over cross-border business exchanges. Chang provocatively asked, “But can this still be considered globalisation?”

The Timing

The timing of China’s announcement is particularly noteworthy. With US Treasury Secretary Janet Yellen due for a high-stakes visit to Beijing, it adds an extra layer of complexity to the already strained US-China relationship. The two superpowers are embroiled in disputes over trade practices, particularly in the domain of semiconductors and raw materials, which form the backbone of advanced technologies.

China’s decision to curb exports of gallium and germanium will have a ripple effect across the globe, affecting the balance of the semiconductor industry and further heating up the “chip war”. The move also highlights the broader issue of how economic policies are increasingly being influenced by national security and technological supremacy concerns. As this story unfolds, the world will be keenly observing how international trade norms and relations are reshaped.