China restrictions on rare earths has caused pricing to double over the past year — critical elements are used in processors, solar cells, and more

After China imposed export restrictions on germanium and gallium last year, it significantly disrupted global supply chains and caused a rather dramatic price surge. The price hikes amid lack of serious competition to Chinese suppliers are now raising concerns about future shortages, reports Financial Times.

China is the leading global producer of these metals and around 94% of the global gallium supply comes from China. As a result, export controls have caused these metals to become significantly more expensive. For example, the price of germanium increased from $1200 per kilogram in Q1 2023 to $2600 in Q3 2034 in Europe, about a 115% jump, according to Financial Times. The situation with gallium is a bit better: Its price 'only' went up from around $300 in early 2024 to around $530 today, approximately a 75% increase.

Beginning on August 1, 2023, Chinese and foreign companies must obtain an export license to ship gallium and germanium metals, as well as any products containing these materials, citing national security concerns. Many see China's move as a response to U.S. restrictions imposed on China's semiconductor, AI, and supercomputing sectors. Each shipment of these materials from China requires government approval, a process that can take between 30 to 80 days. This bureaucratic hurdle adds significant uncertainty to the market, making long-term supply contracts difficult to secure and increasing stress on businesses dependent on these materials.

High-performance products like CPUs and GPUs as well as memory do not use gallium or germanium. However, GaN and GaAs are crucial for power chips, radio frequency amplifiers, LEDs, and several other important applications. As a result, the export controls have particularly impacted production of fiber-optic products, as well as military hardware like night-vision goggles.

Businesses affected by these controls have expressed concern that if China continues to limit exports at current levels, reserves of these essential materials will be quickly depleted, leading to severe shortages. Some companies have already reported a 50% reduction in gallium exports from China.

Reports indicate that China may be stockpiling germanium, contributing to the sharp rise in prices. The amount being stockpiled remains speculative, but it is believed to represent a significant portion of China's annual production.

In addition to germanium and gallium, China has recently extended export restrictions to other materials like antimony, which is used for doping during the production of semiconductors as well as in military applications such as armor-piercing ammunition and precision optics. These broader restrictions add another layer of complexity to an already strained market.

Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.