Prices for gallium are reported to have increased by 50% in just the past seventeen days, following the August 1st enforcement of China’s export restrictions on the rare metal. A vital yet relatively underrepresented material used in chipmaking (especially when reacted towards gallium arsenide [GaA] and gallium nitride [GaN]), gallium production (like that of many other rare earth metals) lays primarily in China’s hands. The country commands as much as 80% of the world’s output, making it a prime candidate for leverage in the global economic tug-of-war between the U.S. and the Middle Kingdom.
As reported by Bloomberg, the price increase means that gallium now sits at a 10-month-high of $400 per kilogram, putting a deeper squeeze on chipmakers and companies that depend on the material (luckily, in trace amounts) for high-performance semiconductor designs. For perspective, high-purity silicon metal (Si) is currently quoted at an average of $2,000 per metric ton – meaning a kilogram runs chipmakers just $2.
Worldwide, gallium refinement facilities are primarily present throughout China and Japan. A lone facility also exists in Europe, but as expected, that’s not nearly enough for the continent’s needs, let alone as an alternative source for the globalized (yet restricted) market. Therefore, non-producing countries must import either the base metal or already-processed gallium arsenide wafers.
Yet due to China’s imposed restrictions, U.S.-based entities looking to import the metal must submit for registration with China’s Ministry of Commerce. While that is a relatively common requirement, the fact that companies could only apply for a license starting August 1st (the same day the export restrictions went into effect) creates a measure of attrition. Add to that the fact that obtaining the license can take up to 45 days and that China announced the restrictions with barely a month to go for companies to adjust (in early July), and the stage was set for the country’s intended disruption.
Due to its relatively exotic usage in electronics and semiconductors, a squeeze on the supply side of gallium disproportionally impacts the U.S.’s chipmaking capabilities. While China may be its home at extraction, the country’s 5-generation gap compared to the U.S. in leading-edge microelectronics means there aren’t many occasions for its chipmaking players to take advantage of its properties. At the same time, the export restrictions mean that China can start stockpiling the rare metal for deployment whenever its chip manufacturing processes are up to the task.
