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Beijing’s recent decision to impose export restrictions on gallium and germanium – key components of semiconductor, defense and solar technologies — has ruffled feathers around the world and, as ARPN noted, ratchets up the weaponization of trade in the context of the Tech Wars between China and the West.

While some chipmakers have played down fears of shortages, former Chinese Vice Commerce Minister Wei Jianguo’s comments to the China Daily newspaper “that countries should brace for more should they continue to pressure China, describing the controls as a ‘well-thought-out heavy punch’ and ‘just a start,’” have prompted fears that more export curbs on critical materials, including on rare earths could be on the menu.

With China controlling roughly 90 percent of the global refined output of rare earths, and the specter of more Chinese export controls looming large, analysts suggest that the United States and its partners must kick their efforts to reduce their reliance on Chinese into high gear.

According to Goldman Sachs analysts, “China is the source of more than 70 percent of the world’s [neodymium and praseodymium] and accounts for over 90 percent of the downstream metal and magnet segment.”

To replicate China’s annual output of 50,000 tons, the West would have to invest anywhere between $15 billion and $30 billion, Goldman says.

The Goldman analysis brings into focus the immense challenges associated with decoupling from China — most notably perhaps permitting:

The analysts note that while demand for NdPr could exceed supply from 2028 onward in light of surging demand in the EV and wind turbine segment, “out of more than 20 projects outside China that could produce some 20,000 tons of NdPr annually, (…) only two to three of these projects can get off the ground this decade.”

Both the United States and the European Union have resolved to make permitting reform a key priority. In the U.S. Senate Majority Leader Chuck Schumer (D-N.Y.) just told his colleagues that the push would be a focus in the weeks leading up to the August recess, while the European Union’s recently released Critical Raw Materials Act (CRMA) calls for streamlining the permitting process for raw materials projects.

However, as followers of ARPN well know, all affirmations of a desire to strengthen domestic supply chains aside, the perennial not-in-my-backyard (NIMBY) sentiment is still strong – not just in the United States, but also in Europe.

Meanwhile, the urgency for reform cannot be overstated, as Beijing will not slow down its global quest for resource dominance, and the critical minerals arms race in the context of the Tech Wars will continue to heat up.

Earlier this week, China placed export restrictions on gallium and germanium – key components of semiconductor, defense and solar technologies.  The unspecified restrictions are set to take effect on August 1, 2023.

Beijing’s move is considered a “show of force ahead of economic talks between two rivals that increasingly set trade rules to achieve technological dominance,” according to the Wall Street Journal, and is part of a larger global trend of nations resorting to export restrictions on critical materials, which have grown more than five-fold over the last decade and have recently ratcheted upwards between the U.S. and China.

As Alastair Neill, board member of the Critical Minerals Institute, told the Wall Street Journal:

“If you don’t send high-end chips to China, China will respond by not sending you the high-performance elements you need for those chips.” 

Whether or not the U.S. will act in time to secure reliable supply of the critical minerals needed for chip manufacturing and other hi-tech industries, is not, as ARPN’s Daniel McGroarty said in 2020 “a question of science or engineering or who boasts the best single atomic layer deposition techniques.”  According to McGroarty, “it’s a question of political will.  And if the ultimate goal is to reshore American control over our economic destiny and national security, the answer is due right now.”

As followers of ARPN well know, China is no stranger to playing politics with its critical minerals leverage, and ARPN has been tracking the weaponization of trade in the semiconductor segment in the context of the Tech Wards between the United States and China since 2020.

The following is a 2020 piece by McGroarty originally published by The Economic Standard. 

Red Tape Helps China, Hurts Critical U.S. Super-Conductor Chip Manufacturing
By Daniel McGroarty
Re-posted from The Economic Standard

Let the Great Re-Shoring begin:  One of the many ways the COVID pandemic will change the behavior of nations is coming into view, with profound implications for the globalization of trade, and where we make what we buy.  With China controlling the chokepoint on medical devices from ventilators and N-95 masks to all manner of prescription drugs, the U.S. is waking up to the dangers of supply chains outside of our control.

Hence the cheering at this month’s announcement that Taiwan Semiconductor, specialty chip supplier to Apple and many other tech giants, will build a next-gen semiconductor factory in Arizona to manufacture their new 5nm — 5-nanometer — chips.  Construction is slated to begin next year, creating 1,600 jobs at a total investment of $12 billion.  Reports indicate that the U.S. Departments of State and Commerce are involved, meaning the move is part of the post-pandemic “de-coupling” from China.

For Taiwan Semi, the new Arizona plant is another link in its evolving U.S. supply chain, joining the company’s fabrication factory in Washington state and design centers in California and Texas.

High-Speed Computing’s Next New Thing

5nm is the next new thing in high-speed computing.  As experts with the Institute of Electrical and Electronics Engineers explain, for all of the dizzying increases in computing power, not much has changed since the invention of the semiconductor:  “the metal oxide semiconductor field-effect transistor, or MOSFET—the kind of transistor used in microprocessors—has included the same basic structures since its invention in 1959.”  What’s changing now is the engineering of the basic gating structure that channels the flow of electrons across the chip.  On the 5nm platform, “Electrons can move more than 10 times as fast in some of these semiconductors, allowing transistors made from these materials to switch faster. More important, because the electrons move faster, you can operate the device at a lower voltage, which leads to higher energy efficiency and less heat generation.”

Secret Sauce

Little wonder 5nm chips have captured the interest not only of Apple and the tech sector, but the Pentagon as well.

What gives 5nm its secret sauce?  Like gastronomes blending obscure spices, 5nm’s designers looking to push the limits of Moore’s Law have turned to a broader swath of the Periodic Table of Elements to expand their computing palate.  Starting with the familiar silicon substrate “wafer,” 5nm layers in exotic elements like silicon germanium for its super-lattice, adding dielectric hafnium-dioxide and gallium arsenide laced with indium – with a side-look at gallium antimonide as a potential substitute.

And that’s where things get difficult, at least if we’re rooting for the U.S. to become the world’s epicenter of 5-nanometer chip production:  The U.S. produces precisely zero of three of these elements — indium and gallium and arsenic – leaving us 100% import-dependent, while we’re 84% import-dependent for antimony, and more than 50% for germanium.  Data for hafnium, among the rarest of the elements, is notoriously harder to come by, with production guesstimated at a scant 70 tons per year.

So if the U.S. is not producing these 5nm materials, where do these essential ingredients come from?

China is the global leader or top U.S. supplier for all six.

Supply Chain Starts With Supply

It’s a harsh reminder that the first word in supply chain is “supply.”  And given that Beijing is not too happy about Taiwan Semi joining the 5nm U.S. supply chain team – after Apple, banned-in-America Huawei is Taiwan Semiconductor’s biggest customer — it may not be a good idea to source key semi-conductor materials from China.  We’ve already seen Beijing threaten to cut off rare earth supplies to the U.S. as part of their trade war strategy.  Do we need to multiply U.S. vulnerability across another half-dozen metals and minerals essential to next generation high-speed computing?

It doesn’t have to be that way:  The U.S. has “known resources” of all six, and already includes them on the U.S. Government Critical Minerals List.  Are the U.S. sources economic?  Not if U.S. laws governing resource development policy make it a decade long odyssey to bring new resource projects into production.  All the tax breaks in Arizona won’t help Taiwan Semiconductor if U.S. policy fails to take seriously America’s critical mineral dependency on China.

What can the U.S. Government do to bridge this resource gap and encourage American production?  Here’s a place to begin:  Decades ago, Congress gave the president authority to invoke the emergency powers of the Defense Production Act (DPA) – which President Trump has done during the COVID pandemic, and did last summer to address the United States’ rare earths dependency.  If it’s dangerous for the U.S. to be 100% import-dependent for rare earths when the leading global producer is China, why not extend the same DPA designation to the other seven metals and minerals – not just the indium, gallium and arsenic we need for 5nm chips, but graphite, tantalum, fluorspar and manganese – where U.S. dependence is also 100% and China dominates global supply?

There’s no question that Taiwan Semi’s engineering team has the expertise to make its next-gen chip a reality. The question concerns the stuff their dreams are made on.  Will the U.S. act in time to secure reliable supply of 5nm materials, or will mineral and metal availability become the new “single point of failure” – subject to some future cut-off ordered by Beijing or disrupted by the return of COVID 2.0 — that will render the new Arizona chip investment inoperative?

That’s not a question of science or engineering or who boasts the best single atomic layer deposition techniques.  It’s a question of political will.  And if the ultimate goal is to reshore American control over our economic destiny and national security, the answer is due right now.

It’s back to the grind. The parades, barbecues, pool parties and fireworks to mark this year’s Independence Day are over.  There’s much to be thankful for, especially at a time when the impact of Russia’s war on Ukraine, now in its second year, reverberates around the globe and geopolitical tensions continue to mount. ARPN has always used (…) more

As nations all across the globe scramble to secure critical mineral supply chains against the backdrop of surging demand in the context of the green energy transition and rising geopolitical tensions, India is stepping up its critical mineral resource policy game. This week, the Indian Ministry of Mines released a comprehensive Critical Minerals List, consisting of 30 (…) more

The West is getting serious about reducing its vulnerabilities against the backdrop of an increased threat of China weaponizing its control of critical materials supply chains. As the Financial Times reports, the Minerals Security Partnership, convened by the U.S. in June of 2022 which encompasses 12 countries plus the European Union, is planning to release by (…) more

Graphene has long been heralded as a wonder material – almost from the time Andre Geim and Konstantin Novoselov used scotch tape to peel individual layers of the material off a chunk of graphite in 2004.  What sounds like a 6th Grade science fair experiment won the physicists the Nobel Prize in 2010. In the dozen (…) more

The United States and the United Kingdom announced the launch of a new “Atlantic Declaration” earlier this month— a self-proclaimed “first of its kind” partnership “which will see our countries work together more closely than ever before across the full spectrum of our economic, technological, commercial and trade relations.” At the heart of the compact is the mutual goal of reducing (…) more

by Daniel McGroarty Google now supports mining?  Not just the crypto kind, or the data kind, but mining mining, the 400-ton-hauler-and-60-ton-bucket-hydraulic-shovel kind. Don’t believe me?  You can Google it:  tap in Google supports mining?  Click on the first article, from GreenBiz: “Google exec: ‘Significant mining’ is key to net zero” You’ll see that Google has moved from support for “urban mining” – (…) more

Resource nationalism has arrived in Africa. After Zimbabwe banned lithium ore exports last December in a move that only permits concentrates to be shipped out, Namibia has banned the export of unprocessed lithium and other critical minerals, according to Reuters. The country is largely known as a source for uranium, but also has significant deposits of lithium (…) more

Two weeks after the U.S. Geological Survey rebuffed a bipartisan call from members of Congress for an “out-of-cycle”addition of copper to the U.S. Government’s official List of Critical Minerals, House Republicans from Western mining states are pushing to achieve the “critical mineral” designation for copper via legislation. Arguing that changing copper’s designation would allow the federal government to more efficiently (…) more