China has announced enhanced control over the export of Gaul and Germany, two central components for the semiconductor sector, effective from August 1. These measures were taken in response to attempts by Washington to limit Beijing’s access to the latest microprocessor technologies. The country’s authorities had warned of upcoming changes in July. China currently holds a leading position in the world markets for Gaul and Germany, producing 80% and 60% of these materials, respectively, according to the Association for Critical Raw Materials (CRMA). Gaul and Germany are classified as “secondary metals” that are usually obtained as by-products of other production processes.
Colin Hamilton, an analyst at BMO Capital Markets investment bank, described China’s actions as a balanced response, particularly considering the restrictions on microcircuit exports imposed recently by the Netherlands. Hamilton expressed China’s stance as, “If you do not provide us with chips, we will not provide you with materials to create them.” Under the new regulations, the export of Gaul and Germany from China now requires specialized licenses. These elements are not only used in chip production but also play a significant role in the military industry.
The Netherlands, the leading manufacturer of equipment for semiconductors through ASML, as well as the USA and Japan, have already imposed their own restrictions on the export of semiconductor technologies to China. These new export controls by China could have negative implications for the global semiconductor industry, particularly in the American segment. Leading companies such as Qualcomm, Intel, and Nvidia have expressed concerns that restrictions on their product supply to China could business.
Qualcomm, for instance, generates over 60% of its income in China by supplying mobile chips to local smartphone manufacturers. The Chinese market is also significant for Intel, accounting for about 25% of all its revenue. Nvidia depends on China as well, with approximately 20% of its revenue coming from the Chinese market. The restrictions imposed by China and other nations on semiconductor technologies and the resulting reduction in the supply of Gaul and Germany could slow down the pace of development in this field and deal a blow to the global semiconductor industry.