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China’s export control measures for raw material

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July 14, 2023

Why in news?

The Chinese Ministry of Commerce announced that it would implement export controls on items related to gallium and germanium which led to a spike in the prices of essential raw materials.

What are the curbs announced by China?

  • According to China, the regulations were being imposed ‘in order to safeguard national security interests’.
  • These control measures will be enforced from August 1, 2023.
  • Impacts - China’s controls will apply to 8 gallium-related products and 6 germanium products.
  • The export operators of gallium and germanium would now have to acquire a specific export licence.
  • The application process requires operators to list the importers, end-users and end use.
  • Crime - Exporting without permission will invite administrative penalties and the exporter will be held ‘criminally responsible’.

Why China imposed export controls?

  • Geopolitical backdrop - China and the U.S. have been locked in a technology trade war that has been escalating since 2019.
  • In October 2022, the U.S. Department of Commerce had implemented a series of export control measures to protect its ‘national security and foreign policy interests’.
  • These measures restrict China’s ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors.
  • The U.S. accused China that it was using the items and capabilities to produce advanced military systems.
  • Others - Japan and the Netherlands followed suit this year and held that the measure was necessary on ‘national security grounds’.
  • China has used the same reasoning of ‘safeguarding national security interests’ for its latest order.

The Netherlands is the home to the world’s most important chip-making equipment manufacturer ASML.

Why is it a matter of concern?

  • China is the world's leading producer of both germanium and gallium.
  • China produces 60% of the world’s germanium 0 and 80% of gallium, according to the Critical Raw Materials Alliance.
  • Germanium and gallium are key to the production of semiconductors and other high-tech products.
  • Now semiconductors have become a flashpoint between the West and China in the ongoing chip-war.

Countries’ response

  • The European Commission has recognised it as a ‘critical raw material’.
  • The Commission’s import dependency on China stands at 71% and 45% for gallium and germanium respectively.
  • In India, the Ministry of Mines identified the two elements to be crucial for the country’s economic development and national security.
  • The U.S. has firmly opposed the export controls of China.

How does China look at these allegations?

  • Chip war - Few see these control measures as China’s countermeasures to the U.S’s decoupling through hegemonism.
  • But, China has denied the assertions that the export measures were targeted at a specific country.
  • China has stressed that it is fair, reasonable and non-discriminatory export control measures.

How will India be affected?

  • The restriction of the export of gallium and germanium will impact semiconductor manufacturing across the globe but the impact is limited.
  • The Chinese export controls are expected to have a short-term impact on India and its industries due to the disruption in immediate supply chains.
  • The price hike resulting from the export control order would affect the cost and availability of chips, potentially impacting India’s chip-making plans.

India is totally import-dependent for germanium and gallium.

What is the way ahead for India’s Semiconductor industry?

  • To ensure a reliable supply chain and long-term consequences for India’s semiconductor industry few other factors has to be considered such as -
    • Alternative supply sources
    • Domestic semiconductor production capabilities
    • Strategic partnerships like the India-U.S. Initiative on Critical and Emerging Technology (iCET)
  • Opportunity - India can see this scenario as an opportunity to move from import-dependent.
  • India can focus on waste recovery from zinc and alumina production to produce the 2 critical minerals which are by-products of the two elements.
  • Substitutes as indium and silicon could also be considered.

Quick Facts

Gallium

  • Gallium is a soft, silvery metal that is in a liquid state near room temperature.
  • It has a low melting point which helps in the production of semiconductors and electronic components.
  • Gallium is used to make gallium arsenide which forms the core substrate for semiconductors.
  • It is used in the manufacture of integrated circuits, light-emitting diodes (LEDs), and solar cells.
  • It also used in automotives and lighting, and for sensors in avionic, space and defence systems.
  • There are some Gallium-based compounds which also have medical applications, including the treatment of certain types of cancers.

Germanium

  • Germanium is a soft, silvery semi-metal found as a by-product of processing bauxite and zinc ores.
  • The semi-metal is a good element for use as semiconductors.
  • It is used in a variety of applications, including fibre-optics, infrared optics (night vision goggles), and solar cell technologies, and infrared sensors.
  • Germanium has also been found to have some medicinal uses and is sometimes used as a dietary supplement.

References

  1. The Hindu - Why is China limiting exports of raw materials?
  2. IE - China to restrict exports of chipmaking materials
  3. Business Today - Why is China restricting 'germanium' and 'gallium' export?
  4. CNBC - China curbs exports of metals critical to chips and other tech
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