The global semiconductor industry is experiencing a period of uncertainty and stockpiling as China recently implemented export controls on gallium, a key metal used in the production of specialty semiconductor wafers. As the world’s largest buyer of gallium, German-based company Freiberger Compound Materials finds itself at the center of this global upheaval.

Freiberger, a major player in the manufacture of wafers for mobile phone radio signal amplifiers and optical electronics, heavily relies on Chinese suppliers for its gallium needs. The forthcoming export controls by China have caused disruptions in the company’s supply chain, leading to an increase in inventory levels and a sense of unease within the industry.

Freiberger accounts for approximately 10% of the global gallium output, making their reliance on Chinese suppliers a critical factor. Over the past decade, Chinese gallium companies have dominated the market with lower prices, pushing out most international competitors. Freiberger, with a 65% market share in gallium arsenide wafers used in smartphone power amplifiers, competes against Japan’s Sumitomo Electric and smaller Chinese manufacturers.

In addition to its use in smartphone power amplifiers, gallium arsenide is also an essential component in red LEDs and red light sensors. This has implications for the automotive industry, as gallium’s potential in electric vehicles could be at risk.

However, Freiberger had anticipated a potential trade crisis and had already stockpiled several months’ worth of gallium. While Chinese suppliers are gathering data to secure export licenses, deliveries may experience a temporary halt when the export controls come into effect in August, resuming about a month later.

Freiberger’s CEO, Michael Harz, remains optimistic about the future of gallium trade flows, citing the immediate repercussions on China’s own electronics industry if disruptions occur. Harz interprets China’s implementation of export controls as a form of “sabre rattling,” considering that the leading power amplifier manufacturers crucial to smartphone connectivity are predominantly based in the US.

Gallium represents Freiberger’s largest single cost as the company consumes dozens of tons of the raw material annually. This highlights the critical role of gallium in the global semiconductor industry and the potential impact of China’s export controls on the supply chain and market dynamics.

As the semiconductor sector and industries worldwide navigate the challenges brought about by China’s gallium export controls, the future of the global semiconductor industry remains uncertain.

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