China has begun restricting exports of two crucial semiconductor industry materials as the chip conflict with the United States heats up.
Under the new regulations, exporting gallium and germanium from the world's second largest economy requires special licences.
The restrictions are a result of efforts by Washington to restrict Beijing's access to advanced microprocessor technology.
China is by far the largest participant in the global gallium and germanium supply chain. According to the Critical Raw Materials Alliance (CRMA), it generates 80% of the world's gallium and 60% of the globe's germanium.
The materials are "minor metals," which means that they are rarely found in nature and are frequently a byproduct of other processes.
In addition to the United States, Japan and the Netherlands - home to key semiconductor equipment manufacturer ASML - have imposed export restrictions on China's chip technology.
Colin Hamilton of the investment firm BMO Capital Markets told the BBC, "The timing of this announcement from China is not coincidental, given the chip export restrictions announced by the Netherlands and others."
"Quite simply, if you don't give us chips, we won't give you the materials to make those chips," he continued.
The incessant back-and-forth between the world's two largest economies has raised concerns about the rise of so-called "resource nationalism" - when governments hoard essential resources to exert influence over other nations.
Dr. Gavin Harper, a critical materials research scholar at the University of Birmingham, states, "Governments are moving further and further away from the globalisation narrative."
"The notion that international markets will simply provide materials is obsolete, and if you take a broader view of the situation, Western industry may face an existential threat."
Gallium arsenide, a gallium and arsenic compound, is utilised in the production of high-frequency computer processors, light-emitting diodes (LEDs), and solar panels.
According to the CRMA, only a handful of companies worldwide produce gallium arsenide of the purity required for use in electronics.
Germanium is utilised in the production of microprocessors and solar cells. It is also used in military-critical vision eyewear, according to Mr. Hamilton.
However, Mr. Hamilton added, "Regional supply from base metal smelters should be sufficient to provide alternatives." China's dominance in the semiconductor industry makes it more difficult to find a solution to the problem of semiconductors of the highest quality. There will likely be some pressure to recycle."
A spokesperson for the Pentagon stated last month that the United States had reserves of germanium but no gallium.
"The [Defence] Department is proactively taking steps... to increase domestic mining and processing of critical materials for the microelectronics and space supply chain, including gallium and germanium," said the spokesperson.
On the other hand, the Chinese export restrictions are anticipated to have limited long-term effects.
Even though China is the leading exporter of gallium and germanium, there are substitutes for the materials in the production of components such as computer circuits, according to Eurasia Group, a political risk consultancy.
It added that there are also active mining and processing facilities outside of China.
The consultancy highlighted parallels with China's export restrictions on rare earth minerals more than a decade ago.
China's dominance of the rare earths supply chain decreased from 98% to 63% in less than a decade, according to estimates by Eurasia.
Anna Ashton, Eurasia's director of China corporate affairs and US-China, told the BBC, "We can anticipate the development and exploitation of alternative sources of gallium and germanium, as well as intensified efforts to recycle these commodities and identify more readily available alternatives."
She added, "This will not be solely due to China's recently announced export restrictions." "It's a result of expectations of growing demand, intensifying geostrategic competition and distrust, and China's documented willingness to restrict imports and exports in service to political and strategic ends."
Washington announced in October that it would require licences from companies exporting semiconductors to China using US tools or software, regardless of where the chips were manufactured.
China has frequently accused the US of "tech hegemony" in response to export controls imposed by Washington.
In recent months, Beijing has also imposed restrictions on U.S. companies with ties to the American military, such as Lockheed Martin.
Meanwhile, Western governments have spoken about the need to "de-risk" from China, which means being less reliant on it for both raw materials and finished products.
However, diversifying supply chains and building up the capability to mine and then, crucially, process metals such as gallium and germanium will take years.
Mineral-rich nations, such as Australia and Canada, view the materials crisis as an opportunity in the long run.
Experts warn that weaponising resources and technological capabilities - as the US and China have both done - will also have global consequences when it comes to the environment.
That is because important new green technologies are reliant on these kinds of materials
"This isn't a national problem. This is a problem that we face as a human race. Hopefully, policymakers can bring their best selves to the table, secure access to those critical materials that are really essential for the energy transition and we can start to tackle some of the challenges around decarbonisation," said Dr Harper.
While the impact of the latest export controls will not be catastrophic for industry or consumers, experts warn it is important to pay attention to where the trend is heading.
"The man and woman in the street cannot relate to gallium and germanium," says Dr Harper. "But equally, they care about how much their car costs or how expensive it will be to switch to green technology."
"Sometimes very abstract policies happening in faraway lands actually translate into something that has a big impact on their lives."
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