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US China Chip War: Export Restrictions Makes Things Escalate
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The ongoing chip war between China and the US has escalated as China tightens its grip on the semiconductor industry by imposing restrictions on key materials required for chip production. These new controls mandate special licenses for the export of Gallium and germanium, which are vital in chip manufacturing and have military applications.
The move comes in response to efforts by the US to limit China’s access to advanced microprocessor technology. As tensions rise between the world’s two largest economies, concerns over “resource nationalism” are surfacing, with governments hoarding critical materials to exert influence over others.
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China's Dominance in Gallium and Germanium Supply
China stands as the dominant player in the global supply chain of gallium and germanium, producing 80% of the world’s gallium and 60% of germanium, according to the Critical Raw Materials Alliance (CRMA). These materials, classified as “minor metals,” are usually by-products of other processes and not naturally abundant. The Netherlands, Japan, and the US have also imposed export restrictions on chip technology to China, sparking a tit-for-tat situation.
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Impact on High-Tech Industries
The new export curbs are likely to have repercussions on high-tech industries that rely heavily on gallium and germanium. Gallium arsenide, a compound of gallium and arsenic, is crucial for high-frequency computer chips, LEDs, and solar panels.
Similarly, germanium is used in microprocessors, solar cells, and military-grade vision goggles. While alternatives and regional supply sources may alleviate some short-term disruptions, the restriction could pose a challenge for top-quality semiconductor production.
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Potential for Alternatives and Resource Diversification
Experts believe that similar to China’s past restriction on rare earth minerals, alternatives and substitutes for gallium and germanium may emerge, leading to diversification in the supply chain. Countries like Australia and Canada, rich in mineral resources, see this situation as an opportunity to capitalize on the materials’ crisis. However, building up mining and processing capabilities will require significant time and effort.
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Global Implications for Green Technologies
As the world moves towards green technologies that rely on these materials, the geopolitical tensions surrounding their supply could have far-reaching environmental consequences. Policymakers must consider the broader implications of weaponizing resources and technological capabilities. Access to critical materials is crucial for the energy transition and global efforts to tackle challenges around decarbonization.
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Long-term Impact and Public Concerns
Though the immediate impact on industries and consumers may not be catastrophic, it is essential to pay attention to the long-term trend. Abstract policies in distant lands can translate into significant impacts on people’s lives. As governments grapple with geopolitical rivalries, there is a growing need to balance resource security, supply chain diversification, and sustainable technological advancements.
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It Will Impact Our Tech!
China’s move to restrict the export of gallium and germanium adds fuel to the escalating chip war with the US and raises concerns over resource nationalism. As geopolitical tensions persist, countries must navigate the delicate balance between resource security and global cooperation.
Diversifying supply chains and investing in alternatives become imperative for industries reliant on these crucial materials. Policymakers must take a holistic approach, considering both economic interests and environmental impacts, to ensure a sustainable and stable future for critical materials and technological advancements.
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