New challenges are facing an already tenuous market for semiconductors as China is making some changes in the name of national security.
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As a key exporter of certain rare minerals that are critical to the production of some computer chips and solar panels, China holds the cards to a burgeoning market where semiconductors serve as the base of many electrical and electronic products.
But instead of selling them on the global market, China has pulled back. The country is reportedly responsible for the production of 80% of the world’s gallium and about 60% of germanium, says CNN - who cites the Critical Raw Materials Alliance. But recent curbs in the name of national security meant China exported none of it in the month of August.
Observers see this move as retaliation in a tech war with the United States. Now China’s regulations require that any exports of these key minerals must be approved by the Commerce Ministry, something the Chinese agency says it is doing – despite the lack of exports last month.
This special permission requirement is being blamed on “national security interests” but is widely believed to be in response to global curbs – including from the US – on advanced chip exports to China.
And whether this tool most hurts global trading partners – or China itself – remains to be seen.
Analysts call the move “a double edged sword” considering it has already caused supplies of these commodities to balloon and prices - specifically for gallium - to drop. Besides this effort’s capacity to hurt the Chinese economy, CNN adds it could also “accelerate the shift of supply chains out of the country.”
**Editor's Note: A viewer and geochemist contacted us related to inaccuracy in our wording: His comment reads as follows: "Gallium and germanium..although rare, are not rare earths and should not be referred to as such. The rare earths elements are the lanthanide elements, La-Lu; although yttrium and scandium may also be included." The article's wording has been updated to reflect this clarification.