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Why is China limiting exports of raw materials?

This article aims to analyze China’s Export Controls to limit exports of raw materials, specifically gallium and germanium, and its potential impact on various industries. It also examines the context behind these restrictions and explores the geopolitical backdrop surrounding this issue. Additionally, the article discusses how India is likely to be affected and highlights possible strategies to mitigate the consequences.

What is the Context?

The Ministry of Commerce recently announced China’s Export Controls on gallium and germanium, citing national security interests. These raw materials play a crucial role in industries such as semiconductor manufacturing, automotive, lighting, avionics, space, defense systems, and solar cells. With China dominating gallium and germanium production, these export controls raise concerns about global supply chains and the reliance on a single country for critical materials.

Curbs on Export:

China’s Ministry of Commerce has mandated that export operators acquire a specific license to export gallium and germanium. Operators must disclose importers, end-users, and end use as part of the application process, and violating these requirements by exporting without permission is a criminal offense.

Impacted Industries:

a. Semiconductor Manufacturing: Gallium is crucial for producing gallium arsenide, a core substrate for semiconductors used in integrated circuits, mobile communications, and displays.

b. Automotive and Lighting: Gallium is used in automotives and lighting applications.

c. Avionics, Space, and Defense Systems: Gallium and germanium are utilized in sensors for avionics, space, and defense systems.

d. Solar Cells: Germanium is important for solar cells due to its heat resistance and high energy conversion efficiency.

Global Dependency and Concerns:

China accounts for 80% of global gallium production and 60% of germanium production. The European Commission recognizes gallium and germanium as critical raw materials. India identifies them as crucial for economic development and national security. The United States and the European Commission have expressed concerns about these export controls. They emphasize the need to diversify supply chains.

Geopolitical Backdrop:

China’s export controls respond to previous export control measures implemented by the United States, Japan, and the Netherlands, aiming to protect national security interests. China denies targeting specific countries and claims to implement fair and non-discriminatory export control measures.

Conclusion and Way Ahead:

China’s export controls on gallium and germanium pose short-term challenges for India and global industries due to disruptions in immediate supply chains. However, India can mitigate the impact by exploring alternative supply sources, strengthening domestic semiconductor production capabilities, and fostering strategic partnerships. Emphasizing waste recovery from zinc and alumina production and considering substitutes like indium and silicon can also enhance self-reliance. Ensuring a reliable supply chain through collaborations such as the India-U.S. Initiative on Critical and Emerging Technology (iCET) is crucial for India’s semiconductor industry’s long-term prospects.

In a rapidly evolving global landscape, countries need to navigate the complexities of supply chain vulnerabilities and seek strategic solutions to maintain economic resilience and national security interests.

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