A tit-for-tat trade war over microchips could derail the transition to a decarbonized economy

Enrique Dans
Enrique Dans
Published in
2 min readSep 24, 2023

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IMAGE: A person with tweezers holding a computer chip — CC0 1.0 Universal (CC0 1.0) Public Domain Dedication

Responding to US-led restrictions on its chip manufacturing industry, China has banned the export of gallium and germanium, making life difficult for overseas chip makers who need these elements, obtained as by-products of zinc and aluminum mining.

It is possible to source these components from other countries, but China produces between 80% and 95% of the world’s gallium, and about 60% of germanium, which will likely hit supply chains, creating new semiconductor shortages. The price of gallium and germanium have fallen considerably in China, as their domestic availability has increased, but have risen in the rest of the world.

Beijing’s ban is in retaliation for the US blacklisting semi-conductor maker SMIC as a supplier for the military in 2020, as well as forcing trading partners like Germany and the Netherlands to do the same by not selling China the chemicals or the machines needed for these processes, particularly in the case of those that enable the production of advanced three-nanometer chips.

The supply of this type of element is quite complex. Relatively small quantities, in the order of hundreds of tons, are produced annually worldwide, while more than a third of the germanium is recycled.

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Enrique Dans
Enrique Dans

Professor of Innovation at IE Business School and blogger (in English here and in Spanish at enriquedans.com)