A tit-for-tat trade war over microchips could derail the transition to a decarbonized economy
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.
In addition to chip manufacturing, restrictions could also affect components used in the electric vehicle and solar panel industries. China is also considering banning the export of other minerals such as neodymium, used to produce the powerful magnets used in many manufacturing processes.
We are facing a long-drawn-out series of tit-for-tat retaliations: the difficulties in the supply chain posed by a trade war mean that highly strategic industries are facing supply problems and may eventually slow down the production of some of the key technologies for decarbonization, the most important technological transition in the history of mankind and the only way to slow down the climate emergency. China has placed itself in an absolutely strategic position to do this through its solar panel and battery technology, and is managing to achieve much more significant reductions in its emissions than other countries, despite starting from a much more worrying situation.
The only way to tackle the climate emergency, which affects us all, is by acting globally and using the resources of all countries. To jeopardize the evolution towards a decarbonized economy because of trade or concerns about technological dominance is deeply irresponsible. There are no winners in trade wars, and at this rate, we all stand to lose.
(En español, aquí)