china's mineral restrictions escalate us-china tech conflict
Washington D.C., Thursday, 5 December 2024.
The semiconductor industry faces significant disruption following China’s recent export restrictions on critical minerals like gallium, germanium, and antimony. Announced on December 3, 2024, these measures are a direct response to the United States’ crackdown on China’s semiconductor sector. The U.S. had tightened controls on semiconductor manufacturing equipment, targeting 140 Chinese companies. This geopolitical standoff threatens global supply chains and the strategic operations of major industry players such as NVIDIA, ASML, and TSMC. Prices for key minerals have surged, with gallium and germanium doubling in cost, impacting chip production schedules. As China controls a substantial share of these materials, the restrictions could lead to long-term challenges for U.S. tech and defense capabilities. The tension underscores the fragility of international supply chains and highlights the urgent need for alternative sources.
Market impact and price volatility
The immediate market effects of China’s restrictions are severe. Antimony trioxide prices in Rotterdam have skyrocketed by 228% in 2024, reaching $39,000 per tonne [5]. China’s antimony product shipments plummeted by 97% in October 2024 following export limitations [5]. With China controlling 98.8% of refined gallium and 59.2% of germanium production in 2024 [5], semiconductor manufacturers face unprecedented supply chain pressures. Major equipment suppliers like Applied Materials, Lam Research, and KLA Corporation could experience significant revenue disruptions due to their China-dependent operations [3].
Global manufacturing shifts
The industry is responding with strategic relocations. TSMC is expanding its presence beyond Asia with substantial investments in Arizona and Japan [2]. Samsung is investing $17 billion in a Texas semiconductor plant, focusing on advanced logic chips for AI and 5G applications [2]. Japan has announced a $65 billion plan to strengthen its domestic chip industry [2]. The U.S. semiconductor manufacturing share is projected to increase to 28% by 2032, driven by the CHIPS and Science Act [2].
Strategic implications
The U.S. Department of Commerce’s recent addition of 140 Chinese chipmaking companies to its Entity List has complicated their access to U.S. technology [1]. The foreign direct product rule now impacts non-U.S. companies exporting key chipmaking equipment to Chinese firms, though exceptions exist for allies like Japan, South Korea, and the Netherlands [1]. The U.S. Geological Survey estimates these restrictions could result in a $3.4 billion loss in GDP for the U.S. economy [1].