Jakarta, CNBC Indonesia – The chip war between China and the United States (US) is heating up. Now, China has started to limit the export of two main materials needed by the semiconductor industry.
Under the new rules, special licenses are required to export gallium and germanium from the world’s second-largest economy. The material is used to manufacture chips for application to military equipment.
The restraint comes after the US made efforts to limit Beijing’s access to microprocessor technology.
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China is by far the largest player in the global gallium and germanium supply chain. They produce 80% of the world’s gallium and 60% germanium, according to industry body the Critical Raw Materials Alliance (CRMA).
The material is a “minor metal”, meaning that it is not usually found alone in nature, and is often a by-product of other processes.
As well as the US, Japan and the Netherlands, which is home to major chip equipment maker ASML, have imposed restrictions on exports of chip technology in China.
“The timing of this announcement from China is not coincidental, given the chip export restrictions announced among others by the Netherlands,” said Colin Hamilton of investment firm BMO Capital Markets. BBCWednesday (2/8/2023)
“Simply put, if you don’t give us chips, we won’t give you the materials to make those chips,” he added.
The technology war between the world’s two largest economies has raised fears of the emergence of “resource nationalism”, in which governments stockpile essential materials to exert influence over other countries.
“We’re seeing governments moving away from the globalization narrative,” said Gavin Harper, critical materials researcher at the University of Birmingham.
“The notion that international markets are just going to ship materials has disappeared and, if you look at the broader picture, Western industry may face a bit of an existential threat,” he added.
However, these Chinese export restrictions are expected to have a limited impact in the long term.
Although China is a leading exporter of gallium and germanium, there are substitute materials in the production of components such as computer chips, says political risk consultancy Eurasia Group.
[Gambas:Video CNBC]
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