How China’s Semiconductor Export Rules Might Affect the Industry Chain (AI Translation)

【周刊提前读】中国管制半导体关键材料出口 产业链会发生什么？

As the new U.S. president prepares to assume office, tensions between China and the U.S. have intensified, particularly concerning technology and trade. A key aspect of these tensions is the U.S. tightening semiconductor export controls against China, to which China has responded by imposing the strictest metal export restrictions on American entities in history. Recently, China's Ministry of Commerce listed entities like General Dynamics, introducing a ban on significant materials such as gallium, germanium, and antimony. This is China's first explicit restriction on critical minerals to the U.S., underscored by a sharp price rise in these metals. [para. 1][para. 3] Company responses and market adaptations vary. The U.S.-China trade war has triggered significant reactions in the global metal market, spurring notable increases in the prices of germanium and antimony. These shifts reflect the tensions governing this titanic rivalry. [para. 5]

Gallium, germanium, and antimony are crucial to the global supply chain, with China dominating production. China provided 98% of the global gallium supply and significant portions of germanium and antimony in 2023. Gallium's price jumped by 15.4% within a month, whereas germanium and antimony prices rose moderately. This strategic move disrupts the supply chains vital to U.S. industries, including semiconductor and military sectors, where these metals are foundational for high-tech applications. [para. 5][para. 6][para. 8] Aware of the vital role these metals play, the U.S. predicts a $3.4 billion GDP decrease should China institute a full export ban. This prediction indicates the severe economic ramifications that could ensue if the situation escalates.[para. 7]

By controlling these resource exports, China is leveraging its dominant position in the global supply chain to counteract U.S. semiconductor restrictions first imposed in 2022. An imbalance in the semiconductor industry is evident as the tighter U.S. export controls create hurdles, supposedly aiming to stymie China's AI and supercomputer advancement. [para. 10][para. 12] China had previously announced restrictions on gallium and germanium in 2023 under the guise of safeguarding its national security, a move that alarmed the global semiconductor sector already consuming its vast production resources.[para. 15]

International reactions to China's export bans have been swift. Countries reliant on China's semiconductor and mineral supplies fear disruptions as they seek alternatives to address this evolving geopolitical issue. [para. 3][para. 24] China is fortifying its strategic resource policies with its Ministry of Commerce highlighting dual-use materials that blend military and civilian applications, citing responsibilities to international norms while addressing national security. Multiple efforts are centered around gaining strategic advantages and controlling the global technological landscape. [para. 6][para. 21]

Ongoing concerns about the broader implications loom, with future adjustments anticipated as China could potentially extend similar controls to other critical resources like rare earths and tungsten. Tungsten, guaranteeing high-performance industrial and defense applications, notably holds strategic value with China providing 80% of global supply. The U.S. is already looking for ways to diversify its resource channels, with countries like Canada serving as alternative sources following Chinese tightening restrictions. [para. 25][para. 28][para. 33]

The global market thus stands at a crossroads amid these ongoing trade tensions. International buyers like Japan and the EU remain cautious, assessing available options as geopolitical dynamics shift, all while navigating existing supply chains and potential new technological routes. The U.S. and allied countries rush to establish alternative supply chains outside of China's grasp, further complicating global technological dependencies and trade partnerships. [para. 5][para. 15][para. 35]