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Tensions between China and the United States have taken another twist as China recently imposed export controls on gallium and germanium, two crucial materials used in chipmaking. While Taiwan Semiconductor Manufacturing Co (TSMC), the leading contract chipmaker and supplier for Apple, believes its production will remain unaffected in the short term, concerns are mounting over the potential consequences if the relationship between the two global powers further deteriorates.
Analysts warn that the situation could worsen, with fears of China implementing export controls on rare earth elements, including lithium, which is vital in battery production worldwide.
The current dispute traces back to an incident in May when the US military shot down a high-altitude balloon suspected of being a Chinese spy device. China vehemently denied the allegations, claiming it was merely a weather balloon that had gone off course. The discovery of intelligence-gathering equipment within the debris contradicted China’s assertion and prompted the US to respond by banning sales of American artificial intelligence (AI) cloud services to China. China, in turn, instructed state-affiliated companies to halt purchases of chips from US-based Micron.
The recent escalation in the diplomatic war between China and the US saw China announcing export controls on gallium and germanium, which are essential raw materials in semiconductor and electric vehicle manufacturing. Companies worldwide are scrambling to secure supplies before the restrictions take effect on August 1. However, TSMC, the primary manufacturer of Apple chips, has expressed confidence that its production will not be directly impacted in the immediate future.
In an email statement, TSMC stated, “After evaluation, we do not expect the export restrictions on raw materials gallium and germanium will have any direct impact on TSMC’s production.” While the company remains vigilant and continues to monitor the situation closely, it refrained from providing further details.
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Despite TSMC’s reassurance, industry analysts caution that if the dispute between China and the US remains unresolved, the situation could take a turn for the worse. The greatest fear is that China might extend its export controls to rare earth elements, including lithium, which are essential for the production of semiconductors and batteries. CNN reports that China is responsible for approximately 60% of the world’s rare earth materials and had previously imposed restrictions on them during a similar dispute in 2010.
Experts believe that the recent export controls on gallium and germanium are just the beginning, with potential additional measures looming. “If this action doesn’t change the US-China dynamics, more rare earth export controls should be expected,” warned analysts from Jefferies. Rare earth materials, although not scarce, require intricate processing and play a critical role in numerous industries, including semiconductors.
