The trade war between U.S. and China is escalating with each passing day. On Monday, China’s Commerce Ministry announced that it would restrict exports of gallium and germanium, along with their chemical compounds, from August 1, 2023, to safeguard national security and interests. These metals are widely used in semiconductors that have applications in electric vehicles (EV), missile systems, solar cells, and other high-tech industries.
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China Restricts Exports of 2 Key Metals
Under the new regulations, exporters will have to apply for licenses to ship these two metals, specifying the details of the importers and the purpose for which these metals will be used. Gallium is a vital component in semiconductors that are used in phone chargers, EVs, and several commercial and military applications. Meanwhile, germanium is used in fiber-optic systems, solar cells, night-vision goggles, and other applications.
According to Reuters, U.S. semiconductor wafer maker AXT Inc (NASDAQ:AXTI) said that its Chinese subsidiary Tongmei would apply for licenses to ensure that it continues to export gallium and germanium substrate products from China.
China’s latest curbs appear to be in retaliation to the Biden Administration’s ban, imposed last year, on sales of advanced chips to the country. In May, China banned its key infrastructure operators from buying the products of Micron Technology (NASDAQ:MU), a leading U.S. chipmaker. Recently, the Wall Street Journal reported that the U.S. is contemplating new restrictions on exports of artificial intelligence (AI) chips to China.
On Tuesday, another report by the media outlet stated that the Biden administration intends to restrict the access of Chinese companies to U.S. cloud computing services. This new rule, if implemented, would require Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) to seek the U.S. government’s approval before providing cloud computing services, leveraging advanced AI chips, to Chinese customers. The rationale behind this potential restriction is that Chinese customers can gain access to the latest computing capabilities without buying advanced technology and chips, including the ones on the restricted list like Nvidia’s (NASDAQ:NVDA) A100 chips.
Overall, the escalating dispute between the two countries could be a drag on U.S. semiconductor stocks, including Nvidia and Micron, as well as U.S.-listed Chinese stocks, like Alibaba (NYSE:BABA) and JD.Com (NYSE:JD).
