China announces stricter measures for exports of metals used in AI chip-making

The Xi Jinping-led Chinese government recently will soon be introducing stricter controls on exports of metals that are primarily used for manufacturing semiconductors for artificial intelligence (AI) systems.

In a July 3 joint statement, China’s Ministry of Commerce and the General Administration of Customs announced that stricter measures were being implemented in view of national security concerns. With the controls that would be implemented on August 1 this year and would need a government-issued license to export specific germanium and gallium products.

The eight gallium-related products that would be impacted by the new controls are gallium selenide, gallium antimonide, gallium phosphide, gallium metal, gallium arsenide, indium gallium arsenide, gallium nitride, and gallium oxide. 

Punishment for those found violating new controls

In addition, the six germanium-related metals would also come under the ambit of these new controls. These products are germanium epitaxial growth substrate, zinc germanium phosphide, germanium metal, germanium dioxide, germanium tetrachloride, and germanium ingot.

According to experts, gallium is widely used in electronics with semiconductors being its most important use case, followed by lasers, transistors, and LEDs. On the other hand, germanium is a key component of semiconductor manufacturing. It’s also used for the production of solid-state electronics and fiber optic systems.

According to the statement issued by the Chinese government, anyone found exporting these products without the required permission or in excess of the prescribed limits would face punishment.

The move could potentially trigger supply-related problems in the semiconductor industry, given how China is a leading manufacturer of semiconductors required for the production of AI systems.

Semiconductor supply highly concentrated to China: Report

In a 2023 report, the European Association of Critical Raw Materials Alliance (CRMA) and the European Commission highlighted that the supply of germanium and related products was still “concentrated in China”. CRMA also stated that China supplied roughly 80% of the gallium to the world.

In October last year, the United States introduced sanctions that restricted Chinese developers’ access to advanced semiconductors. These products included the latest version of global chip manufacturer Nvidia’s H100 and the A100 chips. Currently, Chinese developers can access Nvidia’s H800 and A800 chips. However, these chips can only be used for small-scale AI models.

Companies in China are reportedly figuring out ways to deal with the depleting supply of high-performance chips.

On the other hand, the US administration is currently mulling additional controls on the export of high-end AI chips that can power cutting-edge systems.

Being a leading developer of semiconductors, Nvidia has been making rapid strides following the AI boom. Given the spurt in demand for AI-powered systems, its chip values have also skyrocketed.

Disclaimer: This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.

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