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.
Reduced availability of these materials may lead to a shortage of commodities. Companies heavily reliant on Chinese suppliers may face challenges in securing alternative sources, leading to production delays and increased costs.
Know How You’re Impacted & What Actions to Take
Understanding the layers of your supply chain, down to the raw materials, gives you the advantage of quickly adjusting when events like geopolitical policies take place.
Be alerted when events threaten your supply chain, and quickly identify affected BOMs and parts with the power of SCRM and Open Market. Then, avoid line down situations by taking immediate action on the same P5 platform by finding crosses and alternates while avoiding high-risk , high-cost parts.
While short-term disruptions and price fluctuations are expected, with SiliconExpert you have the intelligence needed to optimize your procurement strategy and stay ahead of disruptive events.