TSMC: Chinese Curbs on Rare Metal Exports Will Not Have Immediate Effect

TSMC and some other chipmakers do not expect Chinese restrictions of gallium and germanium exports to have a direct impact on their business mainly because they get these materials in different forms from suppliers outside of China. Meanwhile, because Chinese companies mainly export gallium and germanium ore and Chinese companies that produce GaN and GaAs chips also use highly waders and gases, export restrictions could hit them.

"After evaluation, we do not expect the export restrictions on raw materials gallium and germanium will have any direct impact on TSMC's production," a statement by TSMC published by Reuters reads. "We will continue to monitor the situation closely."

Taiwan-based Win Semiconductor, a contract maker of GaN and GaAs chips, and Visual Photonics Epitaxy, that produces GaAs and InGaAs wafers, told the news agency that they only purchase limited number of substrates from China and get their substrates from other sources, including from companies based in Germany, Japan, and the U.S. As a result, they will be directly impacted by the curbs. Meanwhile, their suppliers will be impacted severely as China controls over 90% of the global gallium and germanium production. 

But the problem may not be that bad even for suppliers of wafers that buy raw gallium and germanium from China, reports DigiTimes citing industry experts. These export sanctions do not directly translate into a prohibition on production and export activities. Hence, the complete supply chain can still operate, albeit with an additional requirement of obtaining export approval for specific markets. That said, while it may get harder for companies to obtain raw materials, it is unlikely going to be impossible.

When it comes to chip production, gallium and germanium are used in purified forms and purification is mainly controlled by American and Japanese companies, according to the DigiTimes report. New Chinese export sanctions on ores could impact these suppliers unless they can quickly find other sources of ores. 

If China bans sales of gallium and germanium ores to these suppliers, two possible scenarios can unfold. First, China might not be able to export purified gallium and germanium due to restrictions, disrupting the global GaAs and GaN industries. Alternatively, China might improve its refinement technologies and essentially drive rivals out of business, essentially strengthening its near monopoly.  

Regardless which possibility occurs, but foreign suppliers of gallium and germanium-based products must review their inventories and reliance on Chinese mineral sources, the experts note. Meanwhile, non-Chinese gallium and germanium will be more expensive than those sourced from the People's Republic.