Juli 27. 2023

China Imposes New Export Controls on Two Minerals Critical to the Manufacture of Semiconductors

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On July 3, 2023, China announced that gallium and germanium, two rare minerals that are widely used in the production of semiconductors and other high technology goods, would require a license for export from China.1

Other derivative minerals, like gallium nitride, gallium oxide and zone-refined germanium ingot, would be subject to these restrictions, as well.2 The new restriction enters into force on August 1, 2023.

According to Joint Announcement No. 23, 2023, by China’s Ministry of Commerce and General Administration of Customs, the Chinese government would impose the restrictions under its Export Control Law, Foreign Trade Law and Customs Law.3 Companies interested in exporting the relevant minerals after August 1 would need to apply for a license through provincial Ministry of Commerce Authorities.4 The Ministry would then review the application and determine whether the company could continue to export the minerals.5 A Chinese government spokeswoman was quoted as emphasizing that the licensing requirements apply without regard to the particular country of destination, stating after the announcement, “China has always been committed to maintaining the security and stability of the global supply chain, and has always implemented fair, reasonable, and non-discriminatory export control measures.”6

Gallium, germanium, and derivate minerals incorporating them are critical inputs for several high technology products and applications. For example, gallium is a key ingredient in a specific class of semiconductors used in phone chargers and electric vehicles, along with other commercial and military applications.7 Germanium is used to make silicon a faster conductor, and is a key input for fiber-optic systems and solar cells, particularly those used in aerospace and satellite applications.8

Though the export controls are not by their terms limited to any particular country, the timing of China’s announcement comes after several countries imposed restrictions on exports to China, and it remains to be seen how licensing determinations will be applied in practice. Just days before the Chinese government’s announcement, the Netherlands announced a new policy to restrict the export of some semiconductor equipment.9 In recent months, the US has also restricted the export of certain advanced semiconductor manufacturing to China, and reports have emerged that the Biden Administration is considering further restrictions on the export of advanced artificial intelligence chips to China.10 A US Commerce Department spokesperson was quoted as saying the United States “firmly” opposes the action, and added, “These actions underscore the need to diversify supply chains. The United States will engage with our allies and partners to address this and to build resilience in critical supply chains.”11 Companies should continue to monitor these latest Chinese export control restrictions, and the related measures in the US, EU and other jurisdictions, as they will continue to raise complex legal, operational and commercial supply chain issues. 

 


 

1 https://www.wsj.com/articles/china-restricts-exports-of-two-metals-used-in-high-performance-chips-a649402b 

2 Id.; https://www.chinadaily.com.cn/a/202307/03/WS64a2e578a310bf8a75d6cfab.html 

3 http://www.mofcom.gov.cn/article/zwgk/gkzcfb/202307/20230703419666.shtml

4 https://www.cnbc.com/2023/07/06/china-says-it-told-us-europe-about-chip-metals-export-controls-in-advance.html 

5 https://www.cnbc.com/2023/07/06/china-says-it-told-us-europe-about-chip-metals-export-controls-in-advance.html 

6 https://www.wsj.com/articles/chinas-latest-export-controls-prompt-countries-to-explore-supply-chain-diversification-318e74d1?mod=article_inline 

7 https://www.wsj.com/articles/china-restricts-exports-of-two-metals-used-in-high-performance-chips-a649402b

8 Id.

9 https://www.cnn.com/2023/07/03/business/germanium-gallium-china-export-restrictions/index.htmlhttps://www.mayerbrown.com/en/perspectives-events/publications/2023/07/the-netherlands-publishes-new-export-control-rules-for-production-equipment-for-semiconductors

10 https://www.wsj.com/articles/china-restricts-exports-of-two-metals-used-in-high-performance-chips-a649402b

11 https://www.reuters.com/markets/commodities/us-says-it-opposes-export-controls-by-china-metals-will-consult-allies-2023-07-05/

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