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As destructive as it may be, there is a certain symmetry to the latest round of trade wars. Washington is cracking down further on exports of tools and technology required for cutting-edge semiconductors to China; the answer is Beijing containing critical minerals and metals used in many of the same military and engineering applications.
This has long been a lever that Beijing can pull. China produces 98 percent of the world’s supply of gallium and 60 percent of germanium, according to the US Geological Survey. It dominates a host of other so-called rare earths — they’re not so much rare as a hassle to mine — that are used in everything from F-35 fighter jets to night vision goggles to electric vehicles.
Beijing ban, count researchers at the USGS, were able to shave 3.4 billion pounds of economic output. It’s hardly enough to shake Americans; the country generates it in an hour or so; even the modeled worst case is $9 billion. But it may also underestimate the case. Unlike China, which has accelerated a self-sufficiency campaign in chips, corporate America has done little to wean itself off China’s critical minerals.
China’s unauthorized venture into gallium as gallium made it economically unviable for bit players to compete. Turning on or adding capacity to mothball plants in places like Kazakhstan, Hungary and Germany won’t be immediate.
The start is proving slow in the US, too, even when it comes to releasing gallium – a byproduct – from existing bauxite or zinc smelters. Nyrstar, owned by commodity trading group Trafigura, has yet to develop a zinc smelter in Tennessee, which it expects could meet 80 percent of annual US demand for gallium and germanium.
One answer is more government help or making it more available – with a path to top-up if, as is inevitably the case, costs are exceeded. Australia’s (supposedly) pioneering rare earths refinery is only back on the cards after Canberra this month ended a year of wrangling with approval an additional $400 million in cash, plus potential top-up. The original A$1.25 billion was agreed in 2022.
An embargo can, of course, reverse this dynamic, pushing up prices and making the business more profitable: the year-end peak is illustrative. Gallium is a by-product of other processes; Plugging in some extra circuitry to capture it without polluting the environment makes sense if prices are higher. This is what Rio Tinto has dubbed “nose to tail mining”.
But as Nyrstar and the Australian experience show, none of this is happening quickly – and gallium use is increasing. GaN-based semiconductors are faster and more efficient than their silicon counterparts. Germany’s Infineon recently developed 300 mm GaN wafers and sees the GaN market growing to “multi-billion dollars” by the end of the decade.
It is entirely possible for the US to find other sources, by screwing on extra pipelines to relevant smelters, investing in foreign producers, or both. But it has to be fast.
louise.lucas@ft.com
