In recent developments, China has expressed plans to impose export controls on gallium and germanium, starting from August 1, 2023. The elements in question are vital for semiconductor manufacturing. This action is perceived as a reaction to export controls implemented by nations such as the United States, Japan, and the Netherlands, who cite national security and allege China’s involvement in military use and human rights violations. However, China denies these accusations, stating that its export controls aim not to target any country specifically, but to maintain global industrial and supply chain stability.
Understanding Gallium and Germanium
Gallium is a soft, silvery-white metal with a liquid state near room temperature. It is rarely found as a free element, usually existing in small quantities within certain minerals such as zinc ores and bauxite. Gallium arsenide, a central substrate for semiconductors, is produced from gallium. This element is widely used in various industries, including the production of semiconductor wafers, integrated circuits, mobile and satellite communications (in chipsets), and LEDs (in displays). The automotive and lighting sectors also rely on gallium, as do sensors in avionic, space, and defense systems.
Germanium, on the other hand, is a lustrous, hard, silvery-white semi-metal resembling a diamond’s crystal structure. This element finds its usage in numerous electronic and optical applications, prominently in fiber-optic cables and infrared imaging devices. Germanium enhances weapon systems’ operation in harsh conditions. It is also employed in solar cells due to its resistance to heat and higher energy conversion efficiency.
Notably, both gallium and germanium were recently listed on India’s critical mineral list released by the Ministry of Mines. They also feature in the European Union’s list of critical raw materials, acknowledged as crucial for Europe’s economy. The United States and Japan also regard these elements as strategic resources.
China’s Dominance in Supplying Gallium and Germanium
As the world’s leading producer and exporter of gallium and germanium, China holds a significant position in the global supply of these raw materials. According to the European industry body, Critical Raw Materials Alliance (CRMA), China accounts for 80% of the global production of gallium and 60% of germanium. The availability of abundant reserves of these elements in China substantially contributes to its dominant market position. China also imports these elements from countries like Kazakhstan, Russia, and Canada to supplement its domestic supply. With a robust industrial base for processing and refining gallium and germanium into high-purity products, low labor costs, favorable policies, and a sizable domestic market, China is competitively poised in the global supply chain.
Impact of China’s Export Controls on the Market
China’s new export controls are anticipated to have a short-term impact on India and its industries. Currently, all chips in India are imported, with the market projected to reach USD100 billion by 2025, up from the present USD 24 billion. Disruptions in immediate supply chains might result in inflated prices and limited availability of these raw materials in India. The restriction could also affect India’s chip-making plans due to the reliance on gallium and germanium imports. The long-term effects on India’s semiconductor industry will depend on alternative supply sources and domestic production capabilities. Strategic partnerships like the India-U.S. Initiative on Critical and Emerging Technology (iCET) may aid in securing a reliable supply chain. Deloitte India proposes waste recovery from zinc and alumina production as potential sources of gallium and germanium. Thus, India can benefit by focusing on substitutes such as indium and silicon, which would help diversify its supply chain and develop domestic capabilities.
On a global scale, the restrictions might lead to an increase in gallium and germanium prices as supply becomes limited. Countries and companies largely dependent on Chinese supplies might diversify their gallium and germanium sources to counter such export controls. These constraints could also open opportunities for other countries or regions to boost their production and supply of gallium and germanium, potentially leading to a more diversified market.
UPSC Civil Services Examination, Previous Year Questions (PYQs)
In the 2012 UPSC Civil Services Examination, there was a concern regarding the short supply of a group of elements known as ‘rare earth metals’. China, being the largest producer of these elements, had imposed restrictions on their exports. Apart from China, these elements were found only in Australia, Canada, and Chile. Rare earth metals are essential for manufacturing various electronic items, thus creating a growing demand for these elements. When asked which of the statements given were correct, the answer was statements 1 and 3.