After China announced export controls, the price of gallium has risen by over 50% since early July.

Since China announced the implementation of export controls, the price of gallium, an important raw material in the semiconductor industry, has skyrocketed. On July 3rd of this year, the Chinese Ministry of Commerce and the General Administration of Customs jointly issued a notice stating that, in order to safeguard national security and interests, with the approval of the State Council, it has been decided to implement export controls on gallium and germanium-related items, starting from August 1, 2023. Items that meet the relevant characteristics, such as gallium-related items (gallium metal, gallium nitride, gallium oxide, gallium phosphide, gallium arsenide, indium gallium arsenide, gallium selenide, gallium antimonide) and germanium-related items (germanium metal, zone-refined germanium ingots, germanium phosphide zinc, germanium epitaxial growth substrates, germanium dioxide, germanium tetrachloride), shall not be exported without permission. According to Fastmarkets, an institution that provides prices, information, and research on various commodities, since China announced the above notice in early July, the price of gallium has soared by more than 50%, providing further evidence of a tighter market supply. Fastmarkets data shows that on Wednesday, August 9th, the trading price of gallium reached $400 per kilogram, reaching a new high since mid-October last year. It is reported that the surge in gallium prices coincides with Chinese suppliers waiting for export approval. According to the new control regulations, Chinese manufacturers need to obtain permission to ship gallium abroad before exporting. Some exporters have already submitted approval applications, and they expect the approval process to take several weeks. China is an important producer of gallium. The rise in gallium metal prices in the market is not unexpected. The Global Times mentioned in July that shortly after China announced its export control plan, many companies from various countries were preparing to apply for gallium and germanium export licenses. Interface News mentioned in July that the CEO of Freiberger Compound Materials, the world's largest gallium purchaser, stated that due to China's plan to implement export controls on gallium, customers are hoarding the company's specialty semiconductor wafers produced using gallium metal. According to data released by the United States Geological Survey (USGS), the current global gallium metal reserves are about 279,300 tons, with China having the largest reserves of around 190,000 tons, accounting for about 68% of the global reserves. China also has the highest proportion of gallium production. Germany and Kazakhstan stopped gallium production in 2016 and 2013 respectively, while Hungary and Ukraine stopped gallium production in 2015 and 2019 respectively. China's proportion of global gallium production has continued to rise, and as of 2021, it has accounted for over 90% of global gallium production. Data from Shanghai Nonferrous Network shows that before the implementation of export controls, China exported approximately 80 to 90 tons of gallium metal and 50 tons of gallium oxide annually, with domestic production reaching 290 tons. A study on important raw materials conducted by the European Union this year shows that China's smelted gallium accounts for about 94% of global supply. Gallium is known as the "new staple of the semiconductor industry". The semiconductor industry has become the largest consumer sector for gallium, accounting for about 80% of total consumption. Gallium compounds are high-quality semiconductor materials that are widely used in the optoelectronics and microwave communication industries, for the manufacture of microwave communication and microwave integrated circuits, infrared optics and infrared detectors, integrated circuits, light-emitting diodes, and more. Not only has metallic gallium been designated as one of China's strategic reserve minerals, but it has also been included in the strategic or critical mineral lists of developed regions such as the European Union, the United States, and Japan. According to experts interviewed by the Global Times in a previous report, China's export license system can clarify the ultimate users and purposes of these critical metal exports, in order to avoid risks that may harm national security and interests. In addition, against the backdrop of the United States suppressing China's high-tech industry, China's export controls may be seen as a form of countermeasure. Regarding the impact of export controls, an analysis by Wall Street CN previously mentioned that analysts pointed out that China may strictly control the production and export volume of gallium and germanium, and the global trade structure of gallium and germanium may undergo significant changes in the future. China's export quotas for gallium and germanium may be reduced, and it is not ruled out that prices of related products may rise. The metal industry analysis firm, CRU Group, believes that seeking alternatives may be more costly and may hinder technological performance. Guojin Securities believes that as one of the countries with the largest reserves and production of gallium and germanium in the world, China's implementation of export controls on gallium and germanium-related items may have the following impacts: domestic GaAs substrate epitaxy, raw materials, etc., may experience price reductions, while overseas GaAs substrates and raw materials may see price increases and supply shortages, increasing pressure on overseas substrate manufacturers.