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US and Chinese national flags. (Reuters/Yonhap)

Ahead of a three-day visit to China by US Secretary of the Treasury Janet Yellen, Beijing announced plans to step up export controls on the semiconductor materials gallium and germanium starting next month.

With the US effectively banning the exports of advanced semiconductors and semiconductor equipment to China on “national security” grounds, China is now pushing back on the same basis.

In an announcement posted to their websites on Monday afternoon, the Chinese Ministry of Commerce and General Administration of Customs said China would be implementing export control measures as of Aug. 1, which would prohibit the exportation of gallium, germanium, and related compounds without the Chinese government’s permission.

This means that exports of those materials will necessitate ministry approval going forward, while exporting businesses will need to provide detailed reports on foreign buyers.

According to research by the European Union, China respectively accounts for 94% and 83% of global gallium and germanium supplies. If China does bar exports of those materials, the result could wreak havoc on worldwide supply chains.

Last October, the US Department of Commerce announced export controls that effectively prohibit the export of cutting-edge semiconductors and semiconductor equipment to China for national security reasons. Since then, the US has stressed that its policy toward China is not “decoupling,” which would imply severing relations, but “de-risking,” or in other words mitigating national security risks.

Then on Monday, China’s Ministry of Commerce announced tighter export controls on those two rare-earth metals, which are used to make semiconductors and cutting-edge electronics, explaining that the controls are needed “to protect national security and national interests.”

China’s language leaves no doubt that the export controls are a countermeasure against the US, which has been attempting to reorganize supply chains in the areas of semiconductors and batteries. The move can also be taken as a tactical one: seeing as the US has blocked exports of cutting-edge semiconductors, China now means to restrict access to the materials needed for those semiconductors.

China enacted the Export Control Law, which tightened oversight of the export of strategic materials, in October 2020, with the law taking effect that December.

The most striking aspect of Monday’s announcement was its timing. China’s Ministry of Finance posted an announcement to its website on Monday morning that US Treasury Secretary Janet Yellen would be visiting China from July 6-9 to continue high-level talks between the two countries. Then only a few hours later, China’s Ministry of Commerce announced measures that are essentially targeted at the US. China may have played this card now to gain more leverage in the upcoming talks with the US.

Similarly, China announced a ban on domestic sales of products by US-based chipmaker Micron Technology on May 21, about a month before US Secretary of State Antony Blinken’s trip to China in mid-June.

China’s latest restriction could have consequences for South Korea as well.

According to import-export statistics on the website of the Korea Customs Service, Korea imported a total of 54.2 metric tons (valued at US$13.27 million) of gallium during the five years from 2019 to 2023, with 28.2 metric tons (US$6.42 million), or more than half (52.0%), coming from China. Over the same period, Korea imported a total of 13.6 metric tons (US$11.78 million) of germanium. The vast majority (87.5%) of that germanium, adding up to 11.9 metric tons (US$9.8 million), originated in China.

In a Tuesday review of industrial supply chains, Korea’s Ministry of Trade, Industry and Energy predicted that China’s measures would only have a “limited impact on the supply of gallium and germanium in the short term.”

The ministry said that gallium won’t have much of an immediate impact because it’s used in semiconductor R&D. While germanium is used to produce gasses for semiconductor manufacturing processes, other gasses are in use, and import sources can be diversified.

“Gallium nitride is a power semiconductor material used to control high voltages, large electric currents and high frequencies. So far, Korean companies haven’t been producing much of that,” said a source in the Korean semiconductor industry who requested anonymity.

“Since [Korean chipmakers] are boosting investment in that area, there will be an impact in the medium and long term,” the source noted.

By Cho Hyun-june, Beijing correspondent; Ock Kee-won, staff reporter

Please direct questions or comments to [english@hani.co.kr]