Economics International Relations

Why is China restricting raw material exports?

  • The Chinese Ministry of Commerce has imposed export restrictions on gallium and germanium, citing national security concerns.
  • Because of the importance of these basic chemicals in semiconductor manufacture and other industries, the move has sparked worry.

China’s Restriction

  • Specific Licencing Requirement: To restrict the export of gallium and germanium, export operators must obtain a specific licence.
  • The application process requires operators to supply information on importers, end-users, final usage, and the original export contract. Unauthorised exportation will be considered a violation, resulting in administrative penalties and even criminal proceedings.

Concerns and Importance

  • Gallium plays an important role in the production of semiconductor wafers, integrated circuits, mobile communications, satellite communications, LEDs, automotives, lighting, and sensor applications.
  • Germanium’s role: Due to its qualities such as heat resistance and energy conversion efficiency, Germanium is utilised in fiber-optic cables, infrared imaging devices, optical devices, and solar cells.
  • Import Dependence: Because China accounts for 80% of gallium production and 60% of germanium production, countries that rely heavily on imports, such as the European Commission and India, are concerned.

International Reactions

  • United States: The United States opposes China’s export limits and intends to consult with partners and allies on the matter. The emphasis is on diversifying supply networks and strengthening resilience.
  • The European Commission expresses alarm about the development, highlighting concerns about its security implications.
  • Background: For national security considerations, the United States, Japan, and the Netherlands have imposed export control measures aimed at advanced computing chips and semiconductor manufacturing capabilities.

China’s Point of View:

  • China’s Foreign Ministry spokesperson emphasises that the export limitations are not aimed at any one country and emphasises China’s commitment to secure and stable global supply chains.
  • Countermeasures: According to some Chinese officials, the export limitations are only the beginning, and China may escalate its countermeasures if restrictions become more severe in the future.

Impact on India

  • Short-Term Disruption in India: Due to the disruption of immediate supply chains and rising pricing, India may see short-term disruptions in its sectors.
  • Long-Term Impact: The long-term impact on India’s chip-making plans and industries will be determined by factors such as alternative supply sources, domestic semiconductor manufacturing capabilities, and strategic collaborations such as the India-US Initiative on Critical and Emerging Technology (iCET).
  • India has an opportunity: India can investigate waste recovery from zinc and alumina manufacturing for gallium and germanium, as well as other substitutes such as indium and silicon, while focusing on domestic semiconductor production.

@the end

  • Because of their important importance in different industries, particularly semiconductor fabrication, China’s export curbs on gallium and germanium have sparked global alarm.
  • Other countries’ replies reflect the geopolitical backdrop of the ongoing ‘chip war.’
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