Is the global semiconductor shortage coming back due to China's restrictions on raw material exports?

2024.09.03 10:30 (Reprinted in full)

There is a growing concern that semiconductors may once again face a shortage. This is because China has imposed restrictions on the export of essential raw materials for semiconductors.
The tech industry has only just recovered from the global semiconductor shortage not long ago. The previous semiconductor shortage began in the midst of the COVID-19 pandemic in 2020 and lasted until the end of 2023. The impact of the semiconductor shortage spread to various products such as computer processors, graphics cards, game consoles, and automobiles.
There are concerns that semiconductors may once again face a shortage. The reason for this is that the supply of gallium and germanium, which are used in semiconductor manufacturing, is becoming tight.

According to a report by the Financial Times, the Chinese government implemented export restrictions on gallium and germanium in August 2023, causing the cost of both materials to double in Europe over the past year.

The Chinese government imposed export restrictions as a retaliation against the United States. The U.S. has been leading export restrictions on advanced semiconductors and semiconductor manufacturing equipment to China citing national security concerns.

China is a crucial supply base for both minerals that are causing issues. According to the Financial Times, China accounts for 98% of the world's gallium production and 60% of germanium production.
According to anonymous sources from the organization that purchases a large amount of semiconductor raw materials, the situation is "critical".
The impact of supply constraints on gallium and germanium is not limited to consumer electronics and other devices. These two minerals are also used in the production of military equipment such as night vision goggles.
The issue at hand is whether the United States and Western countries, including the Netherlands, will relax export restrictions to avoid a semiconductor shortage.

During the previous semiconductor shortage, multiple industries were affected and weakened. Some automobile manufacturers were forced to halt or reduce production until they could obtain semiconductors. General Motors, Ford, and Toyota were also impacted, resulting in a significant decrease in the number of new cars introduced to the market and a surge in used car prices.
Furthermore, in 2021, the shortage of graphics cards led to a surge in component prices. The demand for graphics chips used in cryptocurrency mining further exacerbated the situation. Some graphics cards were sold for more than four times the retail price. As soon as they appeared online, so-called "reseller bots" quickly bought them in large quantities.

If the supply of semiconductors becomes even more constrained, major semiconductor manufacturers such as Intel could face a significant blow. The company is still in the process of recovering from the previous semiconductor shortage. Intel recently revealed that it incurred a loss of $1.6 billion (approximately 233.5 billion yen) in the April-June 2024 quarter and announced a workforce reduction of 0.01 million 5000 employees. As a result, the company's stock price dropped by nearly 30%.