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In a move that may have far-reaching consequences, China, one of the world’s leading producers of critical minerals, on Monday announced export controls on two technology-critical elements, gallium (Ga) and germanium (Ge), sending shockwaves through the global market.
Though the decision comes as a retaliation against moves of Western countries, it may impact not just India’s ambition of becoming a semiconductor hub but also its burgeoning telecommunications and electric vehicle industries.
Gallium and germanium are usually extracted as by-products from refineries of other metals. Gallium is a by-product of processing bauxite and zinc ores and is used in information and communications industries for semiconductors, integrated circuits, and LEDs. It is also used in electronic circuits, specialised thermometers, barometric sensors, solar panels, blu-ray technology, and pharmaceuticals.
Germanium is formed as a by-product of zinc and sulfide ores. Significant amounts of germanium are contained also in ash and flue dust generated in the combustion of certain coals for power generation. Germanium is used in the value chain of information and communications, clear technology, and advanced manufacturing. It is also used in optical fibres, satellites, solar cells along with cameras, microscope lens, infrared night vision systems, and as polymerisation catalyst.
Though demand for these minerals is limited in the country, it will surge if India becomes a semiconductor hub. The global semiconductor industry is anticipated to grow to $1 trillion in revenues by 2030, according to Deloitte’s 2023 semiconductor industry outlook.
Over six global semiconductor giants have evinced an interest in the Rs. 76,000 crore “Semicon India Programme” and are likely to invest in the near-future.
The first among them is the Foxconn-Vedanta project, which will invest $19.5 billion in the country. Other chip-making giants like Taiwan’s TSMC, US-based Micron Technology, Applied Materials and Lam Research, and India-based Tata are also in the game.
“India needs to take long-term and short-term measures to navigate such trade wars, which are expected to increase in the future as the battle for technology supremacy among counties intensifies. In the short term, there will be a glitch in supply and price rise but this has given an opportunity to other countries to come together and break China’s monopoly in the long-term,” said Tirthankar Mandal, head, Energy Policy, World Resources Institute, India.
“India has also entered the Mineral Security Partnership. Now all these 12 players can work on advancing technology to mine and produce these products. Efforts should also focus on substituting these minerals by other resources,” Mandal added.
According to the United States Geological Survey, in 2022, China accounted for 98 per cent of worldwide 550,000 kg of primary low-purity gallium production. It also contributed 67 per cent to the 140,000 kg germanium produced worldwide in 2021.
Because of China’s dominance in the global supply, both the minerals are on the critical minerals list of all the major economies — Australia, the US, Canada, the UK, Japan, and South Korea, including India. Germanium is not on the critical minerals list of the UK.
Though each country has its own classification of critical minerals, depending on economic development, industry requirements, national interests, security concerns, technology, market changes, and natural resource endowment, for most of them criticality is judged by two main parameters — economic importance and supply risk. In India, according to the “Critical Minerals for India” report, gallium has high economic importance and supply risk but germanium has only high supply risk.
India has two plants — in Uttar Pradesh and Odisha — where gallium had recovered in the past but its current production is unknown because the metal is not found in its pure form but recovered as a by-product while producing alumina. But in the case of germanium, the country is fully dependent on import.
In FY22, the cost of importing these and other minerals in the same category, such as rhenium, titanium, and vanadium, was $15.07 million for India, and China accounted for 41 per cent of it. In FY23, India’s import declined to $12.21 million but China’s share increased to 51 per cent.
Any sudden unavailability of these minerals threatens to disrupt the production of essential components, leading to potential delays, increased costs, and decreased competitiveness for Indian businesses.
Though China’s Ministry of Commerce statement has dubbed the export control move on gallium- and germanium-related items a necessary step “to safeguard national security and interests”, experts say it was Beijing’s retaliation after the US, Japan, and the Netherlands announced tightening their country’s access to certain — mostly Chinese — semiconductor manufacturing equipment and technologies.
From August 1, exporters in China have to apply for permission from the government, with information about the end users and how the materials will be used.
