It was quiet for a while, but now it appears that China is striking back at the West in a trade conflict that continues to expand. Beijing introduced new rules on Monday for the export of minerals and raw materials needed by other countries to make military equipment, chips and solar panels.
Specifically, this relates to new licenses that Chinese exporters must apply for from August if they want to export gallium and germanium metals. These are important raw materials that are appearing in more and more technology and chips as a more efficient replacement for the outdated silicon.
The new export rules will make it more difficult and expensive for the United States, Europe and Japan to obtain the minerals.
ASML hardware limits as of Sept
The decision comes just three days after the Netherlands announced new export rules for chip machines from ASML in Veldhoven. As early as March, the Cabinet endorsed the chip trade restrictions imposed on China by the United States and Japan just before. On Friday, Minister Liesje Schreinemacher (Foreign Trade) announced that restrictions on ASML equipment to China will come into effect from September.
These are huge machines that ASML customers can use to print chips themselves. The duv is a slightly less advanced instrument than the newer “euv”, the export of which to China has been banned for some time.
In March, the country reacted resignedly to the Dutch decision, but now that Schreinemacher has set a specific date, there is still a backlash. And potentially severe backlash. China has an important energy factor in the supply of germanium and gallium.
Minerals from China and Russia
Both metals are becoming increasingly important in making chips because they can make chips and solar panels faster and more energy-efficient than chips that use only silicon as a semiconductor. For example, gallium is widely used to make faster charging equipment for phones and electric cars, and germanium is used in military applications such as thermal cameras, among others.
But the two metals are only available in countries where the West prefers not to do business. In 2020, 68 percent of germanium came from Chinese mines, the Hague Center for Strategic Studies (HCSS) recently wrote in a report. Russia ranks second in the list of miners.
With gallium, the proportions are even more extreme: 97 percent of all production comes from China. HCSS calls it a vulnerability. Almost all of the world’s chip production is dependent on the export of minerals from a few countries. And even if other countries are able to produce gallium and germanium, it will be years before they get off the ground and can be processed.
Dig deeper and deeper
It is not yet clear how strict China will be in approving new export licenses. It is clear that both China and Western countries are getting deeper and deeper into the trade conflict that has gradually emerged.
In October last year, for example, the Americans announced strict rules for the export of American chips and semiconductors to China, fearing that the country would use them for military purposes.
Japan followed the export regulations, and after some insistence, so did the Netherlands. China responded by filing several complaints with the World Trade Organization and banning micron chips from critical infrastructure.
Meanwhile, companies from the respective countries seem to be suffering. In the US, chip maker Nvidia has already had to tweak its products — read: make them less advanced — in order to be able to deliver to China. Chinese manufacturers also expect a loss in revenue due to Monday’s new Chinese rules, he writes Financial Times.
ASML previously said that the company expects little profit and a loss in sales due to the new export rules. Although it will cause trouble anyway, because soon ASML will also have to apply for a permit to export parts from machines that have already been sold.
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ASML is allowed to export fewer chip machines to China ‘for our national security’
The pressure from the United States has worked: some chip machines manufactured by ASML are no longer allowed into China. The ban may be extended.
