China bans export to US of antimony and other serious metals

China has imposed a ban on the export to the United States of a number of materials important for the production of microelectronics and the specilised equipment in the military sphere. The materials subject to the embargo include gallium, germanium, antimony and certain superhard materials. This action was taken by China in response to the latest tightening of sanctions against Chinese importers and manufacturers of microchips, which is arguably the most serious to date. While the decision will not immediately result in the collapse of the American industry, it will undoubtedly lead to a new phase of competition and further fragmentation of the global semiconductor market.

The first stages of the "chip war" were initiated in the United States in the late 2010s, when the Trump administration imposed sanctions on Huawei and a number of other Chinese technology companies. Despite Beijing's strong vocal opposition, this did not prompt any significant retaliatory measures. The situation intensified under Joe Biden. In October 2022, Washington introduced unprecedented restrictions targeting the Chinese semiconductor industry with the aim of inflicting long-term damage.

These developments occurred concurrently with the enactment of the Chip and Science Act, a series of measures designed to foster the localisation of semiconductor production in the United States, thereby narrowing the gap with industry leaders South Korea and Taiwan. The measures were implemented in the context of the race for artificial intelligence, which requires significant computing power. While the United States justified the restrictions on military grounds, this does not fully align with reality. For the majority of military applications, microchips based on 90 nm processes, which were considered state-of-the-art in the early 2000s, are more than sufficient. The sanctions comprised a ban on the supply of equipment and software for chip production, as well as the recall of employees working directly for Chinese companies in the industry or trading with them.
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The impact was not as significant as initially anticipated. It became evident that the Chinese were continuing to make headway in the production of memory chips, for instance. Furthermore, Huawei successfully launched a new model of its phone with a Kirin processor based on the 7 nm process technology (China is prohibited from supplying any chips on processes below 14 nm). The US was unable to swiftly suppress the PRC's semiconductor industry. Subsequently, the US began to exert pressure on various manufacturers of equipment and components, with a particular focus on lithographic machine manufacturers (Dutch ASML). Despite the inability to supply China with machines capable of producing chips using the latest EUV technology, ASML was required to more strictly limit the supply of older equipment, which can also produce 7 nm chips.

However, these measures did not yield the desired results. Consequently, the American administration recently announced a new round of restrictions. The export of any equipment or components to 140 Chinese companies, including Naura Technology Group, has been prohibited.
The firm is of particular interest due to its involvement in the manufacturing of capital goods, specifically the equipment and processes used in the production of chips. Since April, the firm has also been attempting to gain expertise in the production of photolithography equipment (a market currently dominated by ASML). These efforts to establish comprehensive semiconductor self-sufficiency are likely a source of concern for Washington.

This is not welcome news for companies that do business with China. Many of these companies rely on the Chinese market as a vital source of revenue and growth opportunities. The potential loss of this market could have a significant impact on their financial performance and future investment prospects.
Furthermore, there is concern that China may take retaliatory action and that the firm's monopoly or near-monopoly position in the market may be threatened. However, in the past, such players have repeatedly attempted to circumvent American restrictions. As recently as October, Japanese companies were threatened with sanctions if they did not comply with the regulations.
There is a risk that America will be left without  some raw materials.crucial for a number of industry sectors
Nevertheless, this time China is not willing to wait and took its own countermeasures just a couple of days after the American move. On 3 December, the Chinese government enacted a complete ban on the supply of gallium, germanium and antimony to the United States. Plus, the exportof certain superhard materials was prohibited. Furthermore, restrictions on the supply of graphite to the United States were tightened.
It is clear that the Chinese have the ability to use supplies of materials as a weapon. This is due to China's effective monopoly on the global market over the past 30-40 years. The rationale behind this decision is straightforward. By way of illustration, both gallium and germanium are in fact widely distributed.
Accordingly, the proportion of gallium in the Earth's crust is 16 parts per million (ppm), which is approximately on a par with that of lead. Germanium is approximately 10 times less common than other elements, yet it is still more prevalent than silver, iodine, or mercury. The issue is that they are distributed evenly throughout the subsoil. In their purest form, deposits of gallium and germanium are exceedingly scarce.
The vast majority of minerals containing these two elements are found in the ores of other metals, such as zinc, and even coal. Consequently, the production of gallium and germanium is feasible primarily as a by-product of the production of a more widely distributed material. The Chinese were quick to develop non-ferrous metal deposits on favourable terms, becoming leaders in the field.
As a result, the country now controls over 90% of gallium supplies worldwide, and for germanium this figure is 80%. Gallium and germanium exports were first restricted in the summer of 2023, but now it is time for a complete ban on the United States.
While it is possible to identify suitable alternatives for each of these metals, the process will be time-consuming and will result in significantly higher costs.
Other suppliers will likely be able to provide some level of replacement for the Chinese supply (for example, from Kazakhstan), but this will require additional time. It is worth noting that there is currently no cause for concern in the US. Consumers of these resources have their own reserves, which will last for at least several months. Nevertheless, the impact on the US economy is expected to be considerable, with an estimated loss of approximately $3.4 billion.
So  the expected delays in the supply of strategically important raw materials will result in significant cost increases at a time when the US is striving to establish its own full-cycle semiconductor industry.Also, this has a detrimental impact on certain military technologies (such as the metals used in the production of night vision devices) and the manufacture of products in the field of renewable energy.
The mutual restrictions that have been applied represent a new level of intensity in the chip war, with neither the US nor China having ever imposed sanctions of such breadth and depth against each other. However, previous measures, at least in regard to the United States, have had a very limited impact. Despite the sanctions, the Chinese industry continues to operate and has even achieved notable successes. Conversely, the restrictions imposed by the PRC have not significantly influenced the US's resolve to expand sanctions.

It seems likely that this will also be the case this time. China will be able to ensure the production of its previous generation chips by any means necessary (even though the US recently passed its own alternative to the US Chip and Science Act with a total investment of about $50 billion).
The US will also find alternative suppliers for the materials it currently sources from China, even if this results in higher costs. It is becoming increasingly clear that the fragmentation of one of the most technologically complex industrial sectors in the world is accelerating. The global division of labour is undergoing a significant shift. The emergence of two distinct and practically independent technological spheres in the production of microchips – one American and one Chinese – is becoming increasingly probable. This will result in higher production costs, but it will also lead to increased competition. This will have a positive impact on many countries that consume semiconductors.